889 F. Supp. 2d 883
N.D. Tex.2012Background
- Plaintiffs Frankie Sims and Patsy Sims sue Carrington Mortgage Services, LLC for Texas home equity loan issues under Art. XVI §50(a)(6).
- Plaintiffs’ August 2003 home equity loan later had 2009 and 2011 modifications increasing principal via capitalization of past-due interest.
- Defendant filed for foreclosure; after a continuance request, it dismissed and re-modified the loan in 2011.
- Plaintiffs allege the 2009 and 2011 actions violated constitutional provisions governing home equity loans (notably 50(a)(6) and related subsections).
- Court grants defendant’s Rule 12(b)(6) motion, holding the 2009/2011 actions were modifications, not refinances, and dismisses all claims with prejudice.
- Court’s ruling resolves that the modifications complied with the law as modifications, not refinances, and that the open-end/account and loan-to-value arguments do not establish a plausible claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether 2009/2011 transactions were refinances or modifications | Sims argues they were refinances. | Carrington contends they were valid modifications. | Modifications, not refinances. |
| Whether 50(a)(6)(B) loan-to-value limit was violated | Failing to apply 80% limit at each modification violated §50(a)(6)(B). | Limit applies to original loan date; modifications need not recalculate each time. | Limit applied to original loan date; no §50(a)(6)(B) violation. |
| Whether modifications created an open-end account under §50(a)(6)(F) | Modifications constitute open-end credit. | No open-end account; loan is a fixed-schedule modification. | Not an open-end account. |
| Whether §50(f) refinances and §50(g) disclosures apply | Modifications require refinancing disclosures under §50(f)/(g). | Disclosures not applicable to modifications. | Inapplicable; claims dismissed. |
Key Cases Cited
- LaSalle Bank Nat’l Ass’n v. White, 246 S.W.3d 616 (Tex. 2007) (texas home equity lending limitations under Art. XVI)
- Cerda v. 2004-EQR1 L.L.C., 612 F.3d 781 (5th Cir. 2010) (interpretive authority over home equity provisions)
- Tex. Bankers Ass’n v. Ass’n of Cmty. Orgs. for Reform Now (ACORN), 303 S.W.3d 404 (Tex.App.-Austin 2010) (interpretation of home equity regulations)
- Meador v. EMC Mortgage Corp., 236 S.W.3d 451 (Tex.App.-Amarillo 2007) (definition of ‘advance of additional funds’)