home equity loan modifications
Texas Constitutional Home Equity Loan Protections R.I.P.
September 27, 2024 10:29
Today, the Texas Supreme Court denied review of my clients' petition in Earley v. Nationstar, No. 13-22-00246-CV, 2024 WL 1202906 (Tex. App. - Corpus Christi March 21, 2024). The home equity lender in that case refused to correct a serious defect in a Texas home equity loan. The Texas Constitution (Art. XVI, § 50(a)(6)) says that failure to cure following 60 days' notice from the borrower of the defect results in forfeiture of all principal and interest of the loan. However, federal and state courts have held that if a borrower doesn't bring that claim within 4 years after the loan is made, the forfeiture remedy effectively expires — the lender faces no real consequence. My clients, the Earleys, learned of the defect with their loan 10 years after they got it, when other lenders refused to refinance the loan. The trial and appeals courts held that the remedy of forfeiture — the lender loses all principal and interest — had expired years earlier. And the lender was awarded its attorney's fees to boot.
Against this background, note that other cases have held that a borrower cannot even go into court unless they pay off the entirety of a home equity loan. That wasn't asserted in the Earley case, so they proceeded to final judgment where other courts have booted borrowers from court at the outset.
Also, the courts have also held that a home equity lender always has a shadow lien (a so-called "equitable subrogation" lien) if the home equity loan paid off a prior loan, meaning even an invalid home equity loan still leaves a valid lien for a lender to seek to collect or foreclose.
The Earley case represents the first time the Texas Supreme Court has had a clear opportunity to allow the Texas Constitutional remedy of forfeiture to last throughout the life of the loan. But it declined to take up the case.
I suspect this is a harbinger of things to come. I see no real path for borrowers with grievously-defective home equity loans to get meaningful relief in the courts. During the first four years of a loan, few if any borrowers have the means to pay off a home equity loan as the precondition to seeking forfeiture. So they're locked out of the courthouse. But if they manage years later to have the means to pay off the loan and get into court, the forfeiture remedy no longer exists, so a lender has no reason to cure the defective loan.
Section 50, R.I.P. Content may continue . . .
Against this background, note that other cases have held that a borrower cannot even go into court unless they pay off the entirety of a home equity loan. That wasn't asserted in the Earley case, so they proceeded to final judgment where other courts have booted borrowers from court at the outset.
Also, the courts have also held that a home equity lender always has a shadow lien (a so-called "equitable subrogation" lien) if the home equity loan paid off a prior loan, meaning even an invalid home equity loan still leaves a valid lien for a lender to seek to collect or foreclose.
The Earley case represents the first time the Texas Supreme Court has had a clear opportunity to allow the Texas Constitutional remedy of forfeiture to last throughout the life of the loan. But it declined to take up the case.
I suspect this is a harbinger of things to come. I see no real path for borrowers with grievously-defective home equity loans to get meaningful relief in the courts. During the first four years of a loan, few if any borrowers have the means to pay off a home equity loan as the precondition to seeking forfeiture. So they're locked out of the courthouse. But if they manage years later to have the means to pay off the loan and get into court, the forfeiture remedy no longer exists, so a lender has no reason to cure the defective loan.
Section 50, R.I.P. Content may continue . . .
Balloons and Interest-Only Payment Schedules for Texas Home Equity Loans
November 11, 2015 12:37
In the Nationstar MDL, Chase, and Bank of America class actions in which I serve as lead counsel, I am still fiercely trying to uphold the Texas Constitution's ban on volatile payment structures (Art. XVI, Section 50(a)(6)(L)), such as balloons, interest-only payments, and payment volatility. I have now filed a Petition for Review in the Texas Supreme Court in the Nationstar MDL, which is the leading case, and also a Petition for Certiorari in the U.S. Supreme Court (and a Reply there as well) to try to keep the Nationstar, Chase, and BofA class actions alive (BofA is stayed pending the Nationstar MDL final decision). Content may continue . . .
Hitting the Wall: Forbidden Modifications of Texas Home Equity Loans
November 27, 2011 17:45
This article examines the process of modifying or refinancing a Texas home equity loan. The short answer is: if you're behind on your home equity loan, there are very specific ways to legally modify that loan. It's not "illegal" or "prohibited," as the big lenders are now telling their desperate borrowers. But it is very difficult for borrowers already in arrears. Borrowers who are substantially behind on a Texas home equity need to be prepared for foreclosure.Content may continue . . .