The Law Office of J. Patrick Sutton
texas constitution

Revisions to this Blog

In the interest of accuracy, I have revised and deleted prior blog entries that express a legal opinion that modifications of Texas mortgage loans that increase the principal balance of the loan are illegal. With the Texas Supreme Court's decision in Sims v. Carrington Mortgage Services on May 16, 2014, Texas law is now clear that lenders can capitalize past-due sums under the original loan back into the loan, over and over, without limitation. There is no requirement that an existing lender respect the 80% loan-to-value ratio when capitalizing past-due amounts back into the loan. In fact, a loan that met the 80% requirement at closing can be "restructured" a few months later to add the first several months' past-due interest and property taxes into the note, in effect allowing the borrower to borrow more than 80% of the value of the homestead.Content may continue . . .

Texas Supreme Court decides that Modifications of Texas mortgage loans can roll past-due amounts back into the loans

The Texas Supreme Court, in a case I brought and argued called Sims v. Carrington Mortgage Services, has decided that mortgage lenders can roll past-due interest, property taxes, and insurance into existing mortgage loans, including home equity loans. The Court created a new term under Texas law for such transactions under the Texas Constitution's homestead laws, calling them "restructurings."

This was a loss for my clients in many ways, since they and I believed that continuing to give credit under an existing loan -- which lets the lender take ever more collateral of the homestead -- is dangerous and unfair. However, the case clarified that such "restructurings" are legal. That is very important, because lenders had begun halting all modifications of Texas home equity loans before I ever got involved in these cases. Now, it is established that lenders can restructure these loans.

The Texas Supreme Court was not asked to address, and did not address, whether a "modification" or "restructuring" can impose interest-only payments or include a balloon, neither of which appears to be consistent with the express terms of the Texas Constitution.

The Texas Supreme Court also did not decide whether a "restructuring" can include property tax and insurance due in future periods, and we are seeking a rehearing to decide that narrow issue.
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Texas Supreme Court enforces Section 50 as written

Today, the Texas Supreme Court returned to its Norwood decision of 2013 and reiterated that even if the requirements of Tex. Const. art. XVI, § 50 are inconvenient, they must be enforced as written unless and until the people of Texas amend them:

"Whether the constitutional provision’s intended protection is worth the hardship or could be more fairly or effectively provided by some other method is a matter that must be left to the framers and ratifiers of the Constitution,"

said the Court in denying a request for rehearing.
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The statute of limitations is tolled for class members

If you have a Texas home equity loan that JPMorgan Chase, Nationstar, or Bank of America modified to include interest-only payments or a balloon payment, you may already be protected by a pending class action. Your statute of limitations is the one for all class members, which relates back to the date the various class actions were filed. The class actions were filed in 2012 and 2013, protecting class members back to 2008 and 2009.

Don't assume your claim is too late if you fit within one of the class actions I have filed. Call me to discuss, and include your loan modification.Content may continue . . .

Nationstar Texas Class Actions Filed

On behalf of all affected Texans, my clients in Burnet and Dallas Counties have filed class actions against Nationstar Mortgage. The Burnet case is hair-raising: it alleges that Nationstar modified a Texas home mortgage loan (home equity loan, specifically) at least four times, more than doubling the principal amount of the original note and scheduling interest-only payments. The plaintiffs' monthly payment would QUADRUPLE at the end of the modifications, highlighting why the Texas Constitution forbids home equity loans from having interest-only payments.

The cases (click on the case to see the petitions are George et al. v. Nationstar Mortgage, LLC, Cause No. 41914 (Burnet County 424th District) and Graze v. Nationstar Mortgage, LLC, Cause No. DC-13-05406-H (Dallas County 160th Dist). These cases will be combined into the pending Nationstar MDL involving multiple additional cases of the same kind.

If you have a Nationstar loan that was modified, and Nationstar is threatening foreclosure, or badgering you to short-sell or give a deed-in-lieu-of-foreclosure, CONTACT ME IMMEDIATELY to protect your rights.Content may continue . . .

Texas Supreme Court to decide multiple Section 50 Issues

Days after the 5th Circuit U.S. Court of Appeals certified multiple questions to the Texas Supreme Court in my pending cases and class actions against major lenders, the Texas Supreme Court agreed to answer the questions. Just getting these questions resolved is a major victory for Texas borrowers, who have constantly been whip-sawed by the lenders. The lenders repeatedly offer modifications but later deny them when they learn (and admit) them to be illegal in Texas.Content may continue . . .

A blow against Nationstar's Loan Modification Practices in Texas

On August 16, 2013, the Texas Multidistrict Litigation Panel combined all my outstanding cases against Nationstar Mortgage (formerly Centex) in one court. Nationstar not only added very large sums to existing home equity loans with 2-page modifications, but concealed the practice by using interest-only and balloon-note clauses that hid how much was being added to the loans. Combining all the cases is a huge victory for the various plaintiffs around the state, since their payments usually jumped way up and put them in a bind -- making it difficult for them to afford the legal fees to fight Nationstar. Nationstar vigorously opposed consolidating the cases, hoping to keep the plaintiffs spread out and alone in the various counties. Now, as new cases get filed, all the cases will go into one court for uniform handling.

The MDL Order is here.Content may continue . . .

Texas Supreme Court enforces Texas Constitution homestead laws as written!

An important Texas Supreme Court decision came down last week that undoes pro-lender regulations that watered down Tex. Const. art. XVI sec. 50(a)(6). Content may continue . . .

Still trying to dislodge the Priester 5th Circuit statute of limitations decision

The Priesters have asked the U.S. Supreme Court to take up the Fifth Circuit decision in Priester v. JP Morgan Chase Bank, N.A., 12-40032, 2013 WL 539048 (5th Cir. Feb. 13, 2013). That decision imposed a 4-year statute of limitations on Texas home equity lawsuits. I have now filed a friend-of-the-court brief with the U.S. Supreme Court explaining all the reasons why Priester got it wrong, and that there cannot be a statute of limitations on claims under Tex. Const. art. XVI sec. 50(a)(6). The brief I submitted is here. In essence, the brief argues that illegalities in home equity loans that are fundamental and existential cannot be made legal by the passage of time. A bad Section 50 loan must either be cured or forfeited at any point during its long life. The Priesters had their closing in their living room, which is flatly illegal as explained last week by the Texas Supreme Court in the Norwood decision.Content may continue . . .
The Law Office of J. Patrick Sutton