For quite sometime Sections 32.06 and 32.065, Texas Tax Code, have provided the mechanism for lenders to refinance ad valorem tax debt secured by tax liens against Texas homestead (and other property) permitted by Section 50(a)(2), Article XVI, Texas Constitution. Over the years, many mortgage lenders have taken advantage of this mechanism, to the benefit of their borrowers, by traditional refinance loans that refinance the ad valorem tax debt with other debt secured by homestead property. Recent amendments to Sections 32.06 and 32.065 made by Senate Bill 1587 and House Bill 2491, to be effective September 1, 2005, have added new requirements to this procedure. This memorandum summarizes these legislative changes. Senate Bill 1587 amends subsection (g) of Section 32.06 to require the transferee of a tax lien or any successor in interest to notify the holders of all recorded liens on the property before foreclosure in the same manner and within the same time frame as the transferee must notify the owner of the property under Section 51.002 of the Texas Property Code [Texas’ real property foreclosure statute]. In addition, Senate Bill 1587 amends Section 32.065 by adding subsection (g) to read as follows: “A contract under this section must require that the lienholder notify the holders of all recorded liens on the property before foreclosure in the same manner and within the same time frame as the lienholder must notify the owner of the property under Section 51.002, Property Code.” New subsection (g) to Section 32.065 applies only to a contract entered into under Section 32.065 on or after September 1, 2005. A contract entered into before September 1, 2005, is governed by the law in effect on the date the contract was entered into, and the former law is continued in effect for that purpose. (This means pre-September 1, 2005 deeds of trust that refinance ad valorem tax debt in accordance with the law in effect on the date the deed of trust was entered into are still effective.)
