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 . . .

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 . . .

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 . . .

Tags: statute of limitations

In a highly questionable -- well, wrong IMHO-- decision, the 5th Circuit U.S. Court of Appeals has held that Section 50 has a four-year statute of limitations after closing. Priester v. JP Morgan Chase Bank, N.A., 12-40032, 2013 WL 539048 (5th Cir. Feb. 13, 2013). That means that a lien springs into existence after four years even if the loan is wildly noncompliant. For example, if it's an illegal 2d home equity loan on the same property, it will be valid after four years. If it has a balloon at the end of 30 years, that balloon becomes valid after four years. Etc. etc. I submitted an amicus brief to the 5th Cir. (though somewhat late) that I hope will be accepted. The brief is HERE.

There are already cases involving 2d home equity loans that are invalid and home equity loans that recite all sorts of illegal provisions, like personal recourse against the borrower and non-judicial foreclosure. Under the new 5th Circuit rule, all those clauses can be validated a few years into a 30-year home equity loan. The cure provisions of Section 50 thus become irrelevant four years into a home equity loan. One wonders why the people and the legislature of Texas bothered to put in a cure remedy if it was no good for most of the life of a loan.


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In a setback for the cause, a federal district court judge in Austin has dismissed our claims in the proposed JPMorgan Chase class action. That case has now gone up on appeal alongside the Sims v. Carrington Mortgage Services case from a federal court in Fort Worth. The judge for the Western District of Texas held, among other things, that interest-only schedules of payment are allowable. That runs directly counter to the express wording of the regulation that the judge cited but did not quote. I feel very strongly that the case was wrongly dismissed, and I am hopeful that the appeal will be successful.

At a minimum, Judge Sparks acknowledged that one of the plaintiff's balloon-note modifications was illegal, but the court then appeared to impose a new form of pre-suit notification on the plaintiff such that a Texas home equity borrower cannot bring a lawsuit to enforce Section 50 unless and until the borrower has given the lender advance notice of the suit and a right to cure. Section 50 itself contains no such pre-suit notice requirement, and several cases have held that a Section 50 lawsuit itself constitutes proper notice of the claim. Again, I don't agree with the decision, and I am hopeful the pre-suit notice requirement will also be reversed.

Hang in there, Texas home equity borrowers. It's still early in the game.Content may continue . . .

If Nationstar or Centex modified your Texas home equity (or "cash out") loan to establish an interest-only period or a balloon, call me immediately! I've had a spate of calls involving Nationstar and Centex modifications that presumptively violate the Texas Constitution, and it would be wrongful for Nationstar to foreclose. Do not delay getting in touch with me to discuss your modified loan, but please obtain your loan modification paperwork and be prepared to provide that to me by fax (512) 355-4155 or email (jpatricksutton@jpatricksuttonlaw.com). I require a retainer (a deposit) to take these cases, but if your modification violates the Texas Constitution, Nationstar has no lien to foreclose. It's important that you act quickly to protect your Texas Constitutional rights.Content may continue . . .

On December 20, 2012, the plaintiffs in Pennington v. Wells Fargo Bank timely filed a request that the U.S. Supreme Court hear their appeal. The petition is here. The issue is whether a lender can induce a Texas home equity borrower into a HAMP trial period plan of payments that don't pay all interest coming due, which certainly looks like a violation of Tex. Const. art. XVI sec. 50(a)(6)(L). The petitioners argue that the HAMP schedule creates a balloon if the lender denies the permanent modification and demands payment of the interest that builds up during the trial period even though the borrower is making the monthly coupon payment (typically, HAMP trial plans have coupons that the borrower gets).

It's always difficult to be granted U.S. Supreme Court review, but this is a special case that involves a federal program (HAMP) that, by definition, cannot work in Texas. Under Tex. Const. art. XVI sec. 50, esp. 50(e), lenders cannot (in my opinion) add arrears into the principal amount of any Texas home loan. Lenders can either add reasonable closing costs, in the case of purchase-money mortgages; or else make a home equity loan, with all the bells and whistles. However, brief, 2-page forms that add tens of thousands of dollars in past-due interest or property taxes to the home loan note are not allowed. That being the case, HAMP undermines the Texas Constitution. What was the point of HAMP if the state with about 10% of all the mortgages in the country can't take advantage of it?Content may continue . . .

I've gotten a spate of phone calls from borrowers who entered into agreements to modify their Texas home equity loans but have recently been told by their lenders that either (1) the modification was never completed, or (2) the lender is simply canceling the modification. In every case, the borrower made payments under the modification agreement, and the lender accepted the payments. In some cases, the modification agreements were without doubt formally executed by both parties. I take this as a sign that the lenders are now trying to cut down the sizes of the classes in the cases we've brought by declaring that many modifications never happened. Good luck with that.Content may continue . . .

Under the 2012 settlement between the federal government and 49 states, on the one hand, and the major home loan servicers, on the other, the big servicers agreed to give principal reductions to borrowers. How do they do it? Well, in the case of one of the biggest servicers, I reviewed a loan file where the servicer took past-due interest and other charges totaling tens of thousands of dollars, added it back into the loan as NEW principal, then "forgave" that "principal." The servicer then stated it was reporting the principal forgiveness to the IRS on behalf of the borrower since the principal forgiveness amounts to income for the borrower! A redacted copy of that document is HERE. An important point to note in this example is that the lender had previously added past-due interest and other charges into the loan, so this new modification was piling additional increments onto principal on top of what had already been added previously.Content may continue . . .

I am a solo practitioner who decided, when no other options presented themselves for my clients in foreclosure, to take on big banks on behalf of borrowers. Two recent losses in federal court -- Pennington v. Wells Fargo and Sims v. Carrington Mortgage Services -- are a reminder that seeking to un-do events from the 2007 mortgage meltdown faces enormous hurdles. Unprecedented events in the world at large combine with a lack of precedent in the legal arena to make it hard to fight lending practices that seem outrageous and unfair but find no clear prohibition in the law. Courts are being asked to hold banks accountable for actions done on a system-wide basis, the financial consequences of which could be colossal. The banks bring great resources to bear in fighting borrowers and solo lawyers. While I am hopeful that the Carrington federal district court dismissal will be reversed, the reality is that modifications like the ones in that case (where loan principal was increased without formalities) are everywhere, systemic, and simply assumed by many to be valid if for no other reason than the fact that they were done. The banks argue, in essence, that their lending practices have to be allowed even if they violate the Texas Constitution since forbidding them would benefit undeserving borrowers who defaulted -- never mind that these practices benefitted the banks by keeping loans on devalued assets performing and generating cash at some baseline level that they otherwise would not have. At the same time, the banks argue that they must be free to offer the same sorts of deals to other borrowers in financial distress. Borrowers are either ungrateful freeloaders or the lucky future beneficiaries of bank beneficence, depending on what level of the inferno they occupy. From recordings, we now know that the banks have announced policies of not modifying any Texas home equity loans, in any way. That, too, is wrong on the law, and directly in conflict with the banks' position that the Texas Constitution Section 50 was written to give banks the freedom to do more or less as they wish. It puts me in mind of Lance Armstrong and the overwhelming evidence that has come out against him. At what point do the wealthy and powerful finally give in and admit they were wrong? Content may continue . . .

The 5th Circuit U.S. Court of Appeals has upheld the Austin federal district court's dismissal of Pennington v. HSBC Bank and Wells Fargo Bank. Any further appeal must now go to the U.S. Supreme Court. Pennington involves HAMP-program participants who never got finalized loan modifications from Wells Fargo Bank. The 5th Circuit did not examine the Tex. Const. Section 50 claim apart from a footnote. I continue to believe that HAMP form trial plans and permanent modifications are incompatible with Section 50. Any time a borrower gets a schedule of payments that do not pay all accrued interest each month, that seems to run afoul of Section 50, which requires that home equity loans be paid down every month. It will be interesting to see if Plaintiffs seek Supreme Court review.Content may continue . . .

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. Content may continue . . .

The Pennington v. Wells Fargo proposed class action claims that a lender can't lower a Texas home equity borrower's monthly payments without forgiving the arrears that build up, since doing so creates a pool of unpaid interest that can't be added back into the loan (which is what happened in the other class actions I have filed, where the borrowers indisputably got "modifications" that increased the Texas home equity loan principal). In Pennington, the plaintiffs got temporary payment plans (HAMP program agreements), but the Plaintiffs assert that when Wells Fargo finally figured out that the interest arrears caused by the HAMP payment plans couldn't legally be added back into the loan without a Texas Const. Art. XVI Section 50(a)(6) refinance, Wells Fargo didn't forgive the arrears it had created with the reduced payments, as it should have done: it just cut the plaintiffs off from a permanent modification and demanded they catch up immediately. Thus, having drawn the plaintiffs into arrears that could never have been added back into the loan because of the way Section 50 works, Wells Fargo set the plaintiffs up for foreclosure, Plaintiffs allege.

Oral argument is scheduled in New Orleans with the Fifth Circuit U.S. Court of Appeals on September 5, 2012.

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I have filed class actions on behalf of Texas home equity borrowers against both JPMorgan Chase Bank, N.A., successor to Chase Home Finance, and also Bank of America, N.A..

These class actions are identical to the Nationstar class action. They involve the claim that JPMC changed Texas home equity loans into interest-only and balloon-note loans, which the Texas Constitution forbids.

The Chase complaint as filed in the U.S. District Court for the Western District of Texas is here.

The Bank of America complaint as filed in the U.S. District Court for the Southern District of Texas is here.Content may continue . . .

Tags: texas homestead,texas constitution homestead,texas homestead protections

If you have a Texas home equity loan that was illegally modified to include interest-only payments or a balloon, CONTACT ME IMMEDIATELY TO DISCUSS IT.Content may continue . . .

My Pennington v. Wells Fargo class action in federal court in Austin, Texas, concerns MODIFICATIONS TO TEXAS HOME EQUITY LOANS that MAY VIOLATE THE TEXAS CONSTITUTION in the following ways:

• past due interest was included in a new principal amount
• the modified loan exceeded 80% of the fair market value of the home.

Contact me IMMEDIATELY if you have such a situation, even if it's not with Wells Fargo.
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Tags: texas homestead,texas constitution homestead,texas homestead protections