Legal Question in Real Estate Law in Texas

Generally (with some exceptions), if the property is foreclosed upon on the first lien; then the sales money is applied to the first lien until all the amount due on the first lien is paid in full, then any remaining money is applied to the second lien.

If the auction price of the property is insufficient to cover both the first lien and the second lien, then any amount still owed will be personally owed by the borrowers, but the liens no longer apply to the property.

A major exception is tax liens...the government ALWAYS gets its money and tax liens normally jump prior liens to become "first liens".

This answer assumes that the foreclosure was on the first lien (which is superior to the second lien).

You should consult with an attorney for a more in-depth answer to your questions based on the specific facts of your case.