Home Equity Modifications that are interest-only
Sep 26 2012 11:27 Filed in: class action | texas home equity | Wells fargo | bank of america | nationstar | jpmorgan chase
I've recently been seeing modifications of Texas home equity loans that recite an interest-only schedule of payments, usually for 1-5 years. The Texas Constitution, at Article 16 Section 50(a)(6)(L), in my view, makes such modifications illegal. That law provides that a Texas home equity loan must be paid in substantially equal installments that pay all accrued interest as of each payment date. The accompanying interpretive regulations make clear that some principal must also be paid, or else the loan isn't amortizing -- i.e., principal isn't getting paid down. If a modification of a Texas home equity loan recites a schedule of payments without principal -- even for a month -- it isn't amortizing, and the borrower has a strong legal case that the lien is invalid.