Gregory G. Graze and Cynthia A. Criddle v. Nationstar Mortgage, LLC
03-15-00329-CV
Tex. App.Jul 7, 2015Background
- Plaintiffs Gregory Graze and Cynthia Criddle obtained Texas home‑equity loans that complied with Tex. Const. art. XVI, § 50(a)(6) at origination and later defaulted.
- Nationstar (successor to the original lender) entered loan modification agreements that capitalized past‑due interest/escrow, lowered interest to 2% and imposed a temporary interest‑only period (two years), then restored original interest rates and fully amortizing payments for the remaining term.
- Plaintiffs sued seeking declaratory relief: invalidate the liens, forfeit remaining principal/interest, and disgorge payments, arguing the modifications violated § 50(a)(6)(L) (payment schedule must be "substantially equal" and each installment must equal or exceed accrued interest).
- The MDL pretrial court granted Nationstar summary judgment; judgment was final and appealable. Plaintiffs appeal the take‑nothing judgment and ask this Court to render judgment against Nationstar’s cure defense.
- Nationstar’s principal defenses: (1) under Sims v. Carrington, a restructuring that is not a “new extension of credit” is not subject to § 50(a)(6); (2) even if § 50(a)(6)(L) applied, the modifications complied; and (3) any noncompliance was cured by written notice per the constitutional cure provision.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 50(a)(6) applies to the loan modifications | Modifications must meet § 50(a)(6) requirements (e.g., no interest‑only periods; substantially equal payments) because those protections endure | Under Sims, § 50(a)(6) only applies if the restructuring is a "new extension of credit" (satisfy/replace note, advance new funds, or increase original obligations); these modifications did none of those | Court affirmed summary judgment for Nationstar: modifications were not new extensions of credit under Sims, so § 50(a)(6) did not apply |
| If § 50(a)(6)(L) applies, do the modifications comply with its "substantially equal" installment requirement | Plaintiffs: temporary interest‑only payments and subsequent payments violate (L); ballooning payments >2x prior average are prohibited | Nationstar: (L)(i) explicitly permits payments that "equal or exceed the amount of accrued interest" (so interest‑only is permitted); post‑period payments remained substantially equal overall and complied with administrative safe‑harbor math | Even assuming applicability, the modifications comply with § 50(a)(6)(L) |
| Whether any alleged noncompliance was cured | Plaintiffs assert constitutionally defective schedules invalidated liens and entitle them to relief | Nationstar sent written notices modifying payment schedules to permitted amounts before plaintiffs sued, which the constitution treats as the cure itself under § 50(a)(6)(Q)(x)(c) | Any noncompliance was cured prior to suit; summary judgment correct |
| Whether appellate court should render judgment for plaintiffs on Nationstar’s cure defense | Plaintiffs ask this Court to render judgment eliminating Nationstar’s cure defense on appeal | Nationstar: plaintiffs never sought summary judgment on the cure defense in the trial court; appellate rule precludes rendering judgment for a party on an issue they did not pursue below | Court should not (and did not) render judgment for plaintiffs on that defense; affirm trial court judgment in favor of Nationstar |
Key Cases Cited
- Sims v. Carrington Mortgage Servs., 440 S.W.3d 10 (Tex. 2014) (restructuring is subject to § 50 only if it is a new extension of credit; court sets three‑prong test)
- Cerda v. 2004‑EQR1 L.L.C., 612 F.3d 781 (5th Cir. 2010) (interpreting home‑equity provisions in prior context; court addressed variable‑rate/extension issues)
- Fin. Comm’n of Tex. v. Norwood, 418 S.W.3d 566 (Tex. 2013) (constitutional text controls; administrative interpretations are advisory and reviewed de novo)
- Doody v. Ameriquest Mortgage Co., 49 S.W.3d 342 (Tex. 2001) (lender may cure noncompliance before borrower gives notice)
- Star‑Telegram, Inc. v. Doe, 915 S.W.2d 471 (Tex. 1995) (appellate standard that judgment will be affirmed if any ground supports it)