Gregory G. Graze and Cynthia A. Criddle v. Nationstar Mortgage, LLC

ACCEPTED
03-15-00329-CV
5698503
THIRD COURT OF APPEALS
AUSTIN, TEXAS
6/16/2015 3:10:31 PM
JEFFREY D. KYLE
No. 03-15-00329-CV CLERK

FILED IN
In The Court of Appeals For the Third
3rd COURT OF APPEALS
AUSTIN, TEXAS
District of Texas at Austin
6/16/2015 3:10:31 PM
JEFFREY D. KYLE
Clerk

GREGORY G. GRAZE AND CYNTHIA A. CRIDDLE, on behalf of
themselves and all others similarly situated,
Appellants,
v.
NATIONSTAR MORTGAGE, LLC,
Appellee.

On Appeal from the 261st District, Travis County, Texas
MDL Pretrial Court No. D-1-GN-14-005248
Dallas County Originating Case No. DC-13-05406
MDL No. 13-0427

BRIEF OF APPELLANTS

J. Patrick Sutton Jeffrey W. Hurt, Esq.
Texas Bar No. 24058143 Texas Bar No. 10317055
1706 W. 10th Street 10670 N. Central Expy Ste 450
Austin Texas 78703 Dallas, Texas 75231
Tel. (512) 417-5903 Tel: (214) 382-5656
Fax. (512) 355-4155 Fax: (214) 382-5657
jpatricksutton@ jwhurt@hurtberry.com
jpatricksuttonlaw.com

Counsel for Appellants

ORAL ARGUMENT REQUESTED June 16, 2015
 IDENTITY OF PARTIES AND COUNSEL

Appellants: Gregory G. Graze, an individual
Cynthia A. Criddle, an individual
Appellee: Nationstar Mortgage, LLC, a Delaware
limited liability company with
headquarters in Texas

Counsel for Appellants:
J. Patrick Sutton
SBOT 24058143
1706 W. 10th Street
Austin Texas 78703
Tel. (512) 417-5903
Fax (512) 355-4155
jpatricksutton@jpatricksuttonlaw.com

Counsel for Appellees:

Thomas G. Yoxall
Daron Janis
Locke Lord LLP
2200 Ross Avenue Suite 2200
Dallas TX 75201
tyoxall@lockelord.com
djanis@lockelord.com

B. David L. Foster
Locke Lord LLP
600 Congress Avenue, Suite 2200
Austin, Texas 78701
dfoster@lockelord.com

MDL Pretrial Court: 261st District Court of Travis County,
Texas, Hon. Lora J. Livingston

i
 TABLE OF CONTENTS

INDEX OF AUTHORITIES ...................................................................... iii

ORAL ARGUMENT IS REQUESTED ...................................................... 1

STATEMENT OF THE CASE ................................................................... 2

ISSUES PRESENTED ............................................................................... 3

INTRODUCTION ....................................................................................... 4

STATEMENT OF FACTS .......................................................................... 7

SUMMARY OF ARGUMENT .................................................................. 12

ARGUMENT ............................................................................................. 16

I. Standard of Review ........................................................................... 16

II. Section 50(a)(6)(L) prohibits payment shocks even if -- especially
if -- a borrower agrees to them .............................................................. 17

A. Section 50(a)(6) has both one-time requirements and
perpetual requirements .................................................................. 18

B. Section 50(a)(6)(L) prevents payment shocks in multiple ways21

III. The trial court erred in concluding that Nationstar cured the
violations of Section 50(a)(6)(L) ............................................................ 28

PRAYER FOR RELIEF ............................................................................ 31

CERTIFICATE OF SERVICE ................................................................. 32

CERTIFICATE OF COMPLIANCE ........................................................ 33

APPELLANTS' APPENDIX ..................................................................... 34

ii
 INDEX OF AUTHORITIES

Cases
Bally Total Fitness Corp. v. Jackson, 53 S.W.3d 352 (Tex. 2001) .. 12
Centeq Realty, Inc. v. Siegler, 899 S.W.2d 195 (Tex. 1995) ............. 17
Cerda v. 2004-EQR1 L.L.C., 612 F.3d 781 (5th Cir. 2010) ........ 22, 24
Doody v. Ameriquest Mortg. Co., 49 S.W.3d 342 (Tex. 2001) .......... 17
Double Diamond, Inc. v. Saturn, 339 S.W.3d 337 (Tex. App.-
Dallas 2011, rev. denied) ................................................................... 31
Fin. Comm'n of Texas v. Norwood, 418 S.W.3d 566 (Tex. 2013,
reh'g denied) ......................................................................................... 18
Garrett Operators, Inc. v. City of Houston, No. 01-13-00767-CV,
2015 WL 293305 (Tex. App. - Houston [1st Dist.] 2015) .............. 17
Ins. Co. of N. Am. v. Sec. Ins. Co., 790 S.W.2d 407 (Tex. App. --
Houston [1st Dist.] 1990, no writ) .................................................... 17
Sims v. Carrington Mortgage Servs., L.L.C., 440 S.W.3d 10 (Tex.
2014, reh'g denied) .................................................................. 12, 14, 18
Valence Operating Co. v. Dorsett, 164 S.W.3d 656 (Tex. 2005) ...... 16
Statutes and Rules
7 Tex. Admin. Code § 153.1(1) (2015) ................................. 9, 21, 25, 28
7 Tex. Admin. Code § 153.11 (2008) .............................................. 22, 23
7 Tex. Admin. Code § 153.14(2)(C) (2008) .................................... 20, 28
7 Tex. Admin. Code § 153.16 (2004) .............................................. 22, 23
T.R.A.P. 43.3 ........................................................................................... 31
Tex. R. Civ. P. 166a(c) ........................................................................... 16
Tex. R. Civ. P. 42(c)(3) ........................................................................... 12

iii
 Other Authorities
Ann Graham, Where Agencies, the Courts, and the Legislature
Collide: Ten Years of Interpreting the Texas Constitutional
Provisions for Home Equity Lending, 9 Tex. Tech Admin. L.J.
69, 84 (2007) ......................................................................................... 21
Eliz. Olson, Paying Off the Mortgage Is Becoming Harder for
Older Workers, NYT, June 12, 2015 ........................................... 13, 21
Constitutional Provisions
Section 50(a)(6)(B) .................................................................................. 18
Section 50(a)(6)(C) .................................................................................. 20
Section 50(a)(6)(D) ........................................................................... 19, 20
Section 50(a)(6)(F) .................................................................................. 20
Section 50(a)(6)(G) ................................................................................. 20
Section 50(a)(6)(J) .................................................................................. 19
Section 50(a)(6)(K) ................................................................................. 19
Section 50(a)(6)(L) .......................................................................... passim
Section 50(a)(6)(M) ................................................................................. 19
Section 50(a)(6)(N) ................................................................................. 19
Section 50(a)(6)(Q)(i)-(ix) ....................................................................... 19
Section 50(a)(6)(Q)(x) ....................................................................... 11, 31
Section 50(a)(6)(Q)(x)(c) .................................................................. 10, 29
Section 50(a)(6)(Q)(x)(f) ................................................................... 10, 29
Section 50(a)(6)(u) .................................................................................. 21
Tex. Const. art. XVI, § 50(a)(6) .................................................... passim

iv
 ORAL ARGUMENT IS REQUESTED

In the case of home equity loans, the Texas Constitution bars
repayment schedules that are not "substantially equal." Yet
hundreds or thousands of Texas home equity borrowers in the
proposed class now stand to lose their homesteads unexpectedly,
years or decades from now, when large payment shocks come due.
Oral argument is warranted on the novel and important issue
whether the parties to a home equity loan can agree, after
origination and for any reason whatsoever, to abandon the
"substantially equal" payments in the original note in favor of
volatile payment schedules.

1
 STATEMENT OF THE CASE

Nature of the The Texas Constitution requires home equity loans
case: to have "substantially equal" payments. Tex. Const.
art. XVI, § 50(a)(6)(L). This prevents payment
shocks and payment volatility throughout the life
of the loan. The appellant borrowers agreed, when
in financial distress, to abandon their original
payment schedules to new schedules featuring
unusually low payments at first but large payment
shocks later. Nationstar, upon the required notice
of violation from the borrowers, admitted
Constitutional violations yet refused to cure the
even the violations it admitted to. The borrowers
then filed suit to declare the violations and, for
themselves alone, the Constitutionally-mandated
penalty of forfeiture. For the proposed class of
Texas home equity borrowers, Appellants sought
cures for the payment shocks.
Trial court: Hon. Lora J. Livingston, 261st District Court of
Travis County, Texas.
Course of In this proposed class action within an MDL, the
proceedings: borrowers seek a declaration that an agreement
after closing to abandon a home equity loan's
substantially-equal payments violates the Texas
Constitution. Nationstar answered with a general
denial and affirmative defenses. It sought
summary judgment dismissing Appellants' claims
as a matter of law. The borrowers did not seek
summary judgment because of one-way
intervention, which constrains class action
plaintiffs from seeking summary judgment before a
class is certified.
Disposition With no material facts in dispute, the district court
below: granted a general summary judgment to
Nationstar and entered final judgment that
Appellants take nothing. (Appendix A).

2
 ISSUES PRESENTED

The trial court erred in granting the defendant lender's
motion for summary judgment against the plaintiff home equity
borrowers. Specifically:
1. The Texas Constitution requires that home equity
loans be scheduled to be repaid in "substantially
equal" installments for the life of the loan, regardless
whether interest-only payments or a balloon payment
seem like a good deal in the short run or stave off
foreclosure temporarily. Did the trial court err in
holding:

a. that the parties can agree after closing to
override the Constitutional requirement of
"substantially equal" payments?

b. that a schedule of payments with extremely low
teaser payments for several years followed by a
sudden quadrupling or quintupling of the
payments is "substantially equal"?

c. that home equity loan payments can be interest-
only, with no principal component, thereby
generating payment shocks later?

2. Nationstar sent a routine notice to the borrowers
when their interest-only periods ended, informing the
borrowers that a payment spike of quadruple or
quintuple the prior payments was about to kick in.
Did the trial court err in determining that
Nationstar's notice implementing an illegal payment
spike somehow operates as a cure for that illegal
payment spike?

3
 INTRODUCTION

The appellant home equity borrowers maintain that no

matter how willing a desperate or unqualified borrower may be to

waive certain perpetual, cornerstone protections in Tex. Const. art.

XVI, § 50(a)(6), a lender is always forbidden to offer loan terms

that violate those protections -- no matter how good the deal may

seem at first. The protections include the following:
• there is no personal recourse against the
borrower -- the amount yielded by a foreclosure
sale is all the lender can collect;
• the loan is not open-ended, meaning additional
credit cannot be extended from time to time;
• there is no penalty for early repayment;
• there is no non-judicial foreclosure -- either a
Tex. R. Civ. P. 736 expedited foreclosure
proceeding or a lawsuit for judicial foreclosure is
required;
• the loan cannot be accelerated for various
happenings, such as a decline in the value of the
homestead property; and
• there must be "substantially equal payments"
for the life of the loan.
Facially mandatory and perpetual terms like these would be

meaningless if they could be bargained away after closing. And it

would particularly frustrate the remedial aims of Section 50 to

soften or eliminate these requirements during times of borrower

financial distress, when the borrower can be coerced into accepting

4
prohibited loan terms as part of a deal to prevent an imminent

foreclosure.

Section 50(a)(6)(L), the specific requirement at issue in this

case, in essence protects home equity borrowers from payment

volatility by mandating "substantially equal" payments. It thus

forbids "teaser" payments that generate ticking foreclosure time

bombs like balloons or payment spikes. Thus, even if a borrower

agrees wholeheartedly to artificially-low payments for a few years

in exchange for substantially-higher payments later, Section 50

invalidates that agreement to protect borrowers from their own

folly -- and from lender coercion. To take another example, if a

lender offers to modify an existing home equity loan to lower the

interest rate in exchange for the borrower agreeing to become

personally liable on the note, a borrower might think that's a good

deal since it saves the borrower money and prevents a foreclosure.

Nevertheless, it is a prohibited agreement: Section 50's

mandatory, perpetual loan terms even if the borrower is willing to

bargain those terms away.

Section 50 places the risk of illegal terms on the lender, but it

also affords the lender 60 days following notice to cure the

illegality. Cures are not difficult. In the personal-recourse example

5
above, the lender could cure the illegality by making the loan non-

recourse again. Any express allowance for nonjudicial foreclosure

would likewise have to be struck. Balloon-notes have to be cured in

a way that maintains the low payment the borrower initially had,

with, at most, very gradual periodic rises thereafter.

Appellants Graze and Criddle, in order to avoid foreclosure,

agreed to give up their original Constitutionally-compliant,

substantially-equal payment schedules. Nationstar was offering to

roll all their past-due amounts back into their loans, which would

give the borrowers a fresh start but which would also substantially

increase their principal and necessitate a reamortization of the

schedule of payments. Though that meant that the borrowers had

lost ground on paying down their loans, Nationstar also offered to

drastically reduce the interest rate for two years, effectively

turning Appellants' fixed-rate notes into variable-rate notes. As a

further enticement, Nationstar teased the borrowers with a 2-year

break from repaying the re-upped principal. But after that, the

higher principal would kick in over a compressed time period; the

interest rate would spike several-fold; and the borrowers'

payments would suddenly quadruple (Graze) or quintuple

6
(Criddle). 1

When Appellants' interest-only periods ended and they faced

what amounted to a balloon payment 2 in the middle of the

schedule, they notified Nationstar that the schedule was illegal

and asked for a cure that maintained payment equality.

Nationstar not only failed to cure, but confessed that it too thought

that their modifications violated the Texas Constitution! It was a

candid response under the circumstances and one that should have

led Nationstar to cure the loans. However, not only did Nationstar

not cure, it began the process of foreclosing on loans it thought

were invalid.

STATEMENT OF FACTS

Undisputed loan documents in the record establish all the

salient facts. Graze and Criddle each got home equity loans from

Nationstar in the mid-2000's. CR209-239 (Graze); CR268-300

(Criddle). These were fixed-rate loans that scheduled 30 years of

"substantially equal" payments per Section 50(a)(6)(L). CR209-

10, 268-69. Neither Graze nor Criddle disputes the legality of

their original loans. Years later, however, when Graze and

1 Other borrowers in this MDL, such as Mr. Guerra, had payment jumps of
more than ten times the interest-only payments.
2 "Balloon" per 7 Tex. Admin. Code § 153.1(1).

7
Criddle were in financial distress, they agreed to modify their

loans in several respects, including amending the original notes'

payment schedules to affirmatively remove them from compliance

with Section 50(a)(6)(L)'s "substantially equal payments"

requirement.

Gregory Graze's loan

Graze's 2003 home equity loan originally recited 30 years of

payments of $1,896.00 on principal of $300,000. CR209-10;

CR268-69. Over time, Graze paid the principal balance down to

$271,672. CR253. When he was in financial straits in 2010, Graze

agreed to a loan modification that added $24,000 in past-due

amounts back into the note, but with the same maturity date as

before. CR253; App. D. The modification addressed the immediate

impact of this higher principal in a shorter payoff period by

drastically reducing the interest rate and scheduling two years of

interest-only payments of $493.27, a mere fraction of the original

loan payment. App D. When principal payments resumed,

however, Graze's interest rate more than tripled, and his

payment more than quadrupled, shooting from $493.27 to

$2,159.71. App. D.

Graze attempted to get another modification at that point

8
because he couldn't afford the balloon payment. CR346; see 7 Tex.

Admin. Code § 153.1(1) (2015) (any payment more than double

the amount of prior payments is a "balloon" within the meaning

of Section 50(a)(6)). Nationstar told him he was ineligible because

he had a Texas home equity loan, which Nationstar has long

maintained -- even through early 2015 -- cannot legally be

modified. CR347. Nationstar told Graze that his prior

modification had "probably" been a mistake. CR347.

Given Nationstar's admission, Graze formally notified

Nationstar in February 2013 that his modification violated

Section 50(a)(6), and in two ways: (1) adding new principal

without the origination of a new home equity loan, as Nationstar

admitted to Graze, and (2) scheduling interest-only payments, as

Nationstar would admit to another borrower. CR347. In response,

Nationstar wrote back to Graze twice, both times asserting its

corporate position that modifications of Texas home equity loans

that add past-due sums into the principal of the note violate the

Texas Constitution. CR349, 351. Nationstar did not, however,

offer any cure to Graze for what it continued to believe was a

violation. CR340.

Nationstar has also taken the position that interest-only

9
payments violate Section 50: it admitted as much to MDL

plaintiff Ernest Guerra around this time. CR363, 364-366. As

with the capitalization of past-due amounts into principal,

however, Nationstar chose not to cure Graze's interest-only

payments by offering him a new schedule that maintained

payment equality. See Section 50(a)(6)(Q)(x)(c), Section

50(a)(6)(Q)(x)(f) (cures). Instead, it noticed default and an intent

to foreclose. CR343, 349.

Cynthia Criddle's loan

Criddle's 2006 home equity loan originally required 30 years

of payments of $825.00 on principal of $100,800. CR268-69. When

she was in financial straits in 2010, Criddle agreed to a loan

modification that added $7,700 in past-due payments back into

the note. CR302, 309. The modification blunted the impact of the

higher principal in a shorter payoff period by scheduling 2 years

of $177.00 interest-only payments at a 2% interest rate, resulting

in near-term payments of a fraction of her original payment.

CR302, 309. When principal payments resumed again, Criddle's

interest rate increased nearly five-fold, from 2% to over 9%, and

her payment spiked to $910, more than five times the prior

scheduled payments. CR302.

10
 Criddle sent Nationstar notice of the violation of Section

50(a)(6)(L) on January 28, 2013, and again on April 23, 2013.

CR356, 358. She, like Graze, also asserted that the adding of

past-due sums into the note required origination of a new home

equity loan. Despite its corporate positions agreeing with Criddle

on both counts, Nationstar failed to offer any cure under Section

50(a)(6)(Q)(x). CR354, 360. As it had with Graze, Nationstar

noticed default and an intent to foreclose. CR372. 3

Other procedural and substantive matters

Graze and Criddle each filed suit in Dallas County in 2013

after Nationstar refused to cure the illegalities it said existed.

CR35, 52. In August, 2013, the MDL Panel, over Nationstar's

opposition, ordered the Nationstar cases consolidated. App. E.

Just over a year later, Judge Lora Livingston was appointed as

the MDL judge. App. E. Graze and Criddle combined their suits

into one proposed class action, the sole class action in the MDL. 4

CR10, 163. Graze and Criddle nonsuited their prior claim that

past-due sums cannot be capitalized into the note because the

3 Nationstar has continued into 2015 asserting to borrowers, despite Sims
having been decided in mid-2014 as discussed below, that modifications that
capitalize past-due sums into the note violate Section 50. CR367. The
borrower who received CR367 is now an MDL plaintiff.
4 Undersigned counsel represent all the plaintiffs in all the cases.

11
Texas Supreme Court validated capitalization modifications in

2014. CR167. See Sims v. Carrington Mortgage Servs., L.L.C., 440

S.W.3d 10 (Tex. 2014, reh'g denied) ("restructurings" that merely

add sums already owed are allowed so long as they don't change

other loan terms).

Nationstar targeted this class action as the leading MDL

case to challenge by summary judgment. CR186. Graze and

Criddle filed a response but did not file a cross-MSJ owing to the

Texas Supreme Court's concerns with one-way intervention.

CR322, 323. See Tex. R. Civ. P. 42(c)(3); see generally, Bally Total

Fitness Corp. v. Jackson, 53 S.W.3d 352, 355 (Tex. 2001). One-

way intervention refers to the problem where potential members

of an uncertified class are given an unfair advantage if they know

the results on the merits of the case before they are forced to opt

out or opt in. Id. at 355-57 (majority), 359-60 (dissent). The trial

court held a hearing on Nationstar's motion on May 12, 2015.

SUMMARY OF ARGUMENT

Section 50(a)(6) has both one-time requirements applicable

only at closing and certain other requirements that are perpetual

for the life of the loan. The one-time requirements include a

closing at a lender, title company, or law office; various signature

12
and documentation requirements; and the requirement that the

loan not exceed an 80% loan-to-value ratio as of the date of closing.

The perpetual requirements include non-recourse against the

borrower, mandatory judicial foreclosure, and substantial payment

equality.

The perpetual, cornerstone requirements would be toothless

if they could be amended away a month, a year, or a decade after

the loan is closed. Any exception that allowed a borrower to give

these Constitutional rights away after closing owing to the

borrower's financial distress, or because waiving them seemed like

a good deal in the near term, would be at odds with the long-term

remedial aims of Section 50, since a desperate borrower will agree,

in the heat of the moment, to almost anything to hang on to the

homestead, only to rue that folly when the consequences hit home

years or decades later. See Eliz. Olson, Paying Off the Mortgage Is

Becoming Harder for Older Workers, NYT, June 12, 2015. 5

Section 50(a)(6)(L) attacks in multiple ways the problem of

"teaser payments" -- initial payments that are artificially low --

and the payment shocks that result:

• First, Section 50(a)(6)(L) requires that payments be

5Accessed at: http://www.nytimes.com/2015/06/13/your-money/paying-off-the-
mortgage-is-becoming-harder-for-older-workers.html?emc=eta1&_r=0

13
 "scheduled." That means there has to be an

amortization of the precise amount of principal and

interest owed that generates specific installment

payments until payoff.

• Second, it requires that each installment "repay" the

loan, meaning each payment has to include some

principal.

• Third, payments must be "substantially equal." That

rules out wild interest-rate swings, teaser periods

that create payment spikes later, and balloon

payments. 6

Appellants originally asserted two practices as invalid under

Section 50: (1) the volatile payment schemes, and (2) the

capitalization of past-due sums into the note. They nonsuited the

latter by amendment after the Texas Supreme Court decided in

2014, in Sims v. Carrington Mortgage Services, LLC, that home

equity loans can be "restructured" to capitalize past-due sums back

into the note without the origination of an all-new home equity

loan complying for a second time with all the requirements of

6 Though not at issue here, there is one more requirement. Each payment
must pay all the interest due for that payment's installment period.
Otherwise, the loan would be negatively amortizing: accrued but unpaid
interest would be piling up, creating a payment shock (a balloon) later.

14
Section 50(a)(6). Sims, 440 S.W.3d 10.

The 2014 Sims decision, however, did not say that once a

home equity loan has been modified to capitalize past-due sums,

terms that originally complied can be changed to new terms that

conspicuously do not -- in essence, that the loan is no longer bound

at all by Section 50. That is Nationstar's interpretation, which

construes Sims as giving lenders carte blanche to violate Section

50(a)(6) in every conceivable way if a borrower in financial distress

is given what seems like a good deal in the short run but which

actually bargains away important rights. If Nationstar's position

were correct, the mere fact that the borrower had agreed to add

past-due sums into the note to avoid foreclosure would also allow

the borrower to waive judicial foreclosure and non-recourse

liability. Yet those are indelible hallmarks of a Section 50(a)(6)

loan. So too is the requirement of "substantially equal" payments,

which looks forward decades and thus rules out any waiver by the

parties.

Sims is also not factually on point since it did not involve a

new, volatile payment schedule. Just the opposite: the Supreme

Court stated that the borrowers' payments in Sims remained

substantially equal after the modification, raising no issue under

15
Section 50(a)(6)(L). 440 S.W.3d at 16. According to Sims, the

capitalization event, in and of itself, does not violate Section

50(a)(6)(L)'s substantial equality requirement if the capitalization

restructuring "merely adjusts the regular installment amount." Id.

Here, by contrast, the loan modifications affirmatively abandoned

the substantially-equal payment terms of the original notes and

changed them to interest-only schedules that led to payment

shocks later. The Supreme Court didn't have to decide the legality

of that practice because Sims didn't involve any change to the

original payment scheme. Sims does not discuss balloons or

interest-only schemes except by negative implication -- adding

money to the note is fine so long as the "regular" payments are

merely adjusted accordingly, with some principal and all interest

part of each installment.
ARGUMENT

I. Standard of Review
Summary judgments are reviewed de novo. Valence Operating

Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005). A movant is

entitled to traditional summary judgment if (1) there are no

genuine issues as to any material fact and (2) the moving party is

entitled to judgment as a matter of law. Tex. R. Civ. P. 166a(c);

16
Garrett Operators, Inc. v. City of Houston, No. 01-13-00767-CV,

2015 WL 293305, at *3 (Tex. App. - Houston [1st Dist.] 2015).

To obtain traditional summary judgment on an opposing

party's claims, the movant must conclusively negate an element of

each claim or conclusively establish each element of an affirmative

defense. See Centeq Realty, Inc. v. Siegler, 899 S.W.2d 195, 197

(Tex. 1995).

If a final summary judgment order does not specify the

particular ground on which it is based, the party appealing must

show that each independent argument alleged in the motion for

summary judgment is insufficient to support the trial court's

order. Ins. Co. of N. Am. v. Sec. Ins. Co., 790 S.W.2d 407, 410 (Tex.

App. -- Houston [1st Dist.] 1990, no writ).

II. Section 50(a)(6)(L) prohibits payment shocks
even if -- especially if -- a borrower agrees to them

When interpreting the Texas constitution, the Court relies

“heavily on its literal text and must give effect to its plain

language.” Doody v. Ameriquest Mortg. Co., 49 S.W.3d 342, 344

(Tex. 2001). The Court strives to give constitutional provisions the

effect their makers and adopters intended. Id.

17
 A. Section 50(a)(6) has both one-time requirements
and perpetual requirements
Consumers get home equity loans to pledge their homesteads

as the collateral for the purchase of consumer goods or the

repayment of credit card debt, among other things. The Texas

Constitution only allows foreclosure of such loans if stringent

conditions to protect borrowers and prevent lender coercion are

met. Tex. Const. art. XVI, § 50(a)(6); see Fin. Comm'n of Texas v.

Norwood, 418 S.W.3d 566, 571, 588-89 (Tex. 2013, reh'g denied)

(history and purposes of Section 50(a)(6)). In practice, home equity

loans in Texas are usually the primary mortgage, either because

they pay off Section 50(a)(1) purchase-money mortgages, or

because someone who already owns a home wants to use the equity

to buy a boat or take a vacation.

Some of the requirements of Section 50(a)(6) are one-time

events at closing; others are perpetual for the life of the loan. An

example of a one-time requirement is the 80% maximum loan-to-

value ratio, which expressly applies only “on the date the extension

of credit is made.” Section 50(a)(6)(B) (emph. added); Sims v.

Carrington Mortgage Servs., L.L.C., 440 S.W.3d at 17 (past-due

sums added to loan are not an "extension of credit"). Section 50

would effectively bar home equity lending if it invalidated existing

18
loans for loan-to-value fluctuations. Another example of a one-time

requirement is that the home equity loan "is the only debt secured

by the homestead at the time the extension of credit is made."

Section 50(a)(6)(K) (emph. added). And there are numerous

documentation-type requirements that apply at closing. See, e.g.,

Section 50(a)(6)(M), Section 50(a)(6)(N), Section 50(a)(6)(P),

Section 50(a)(6)(Q)(i)-(ix).

By way of contrast to the one-time 80% LTV requirement, a

separate market-value-type requirement in Section 50 is not one-

time but perpetual: a home equity loan “may not be accelerated

because of a decrease in the market value.” Section 50(a)(6)(J).

"Not" in this instance has to mean "never" or else the prohibition

would make no sense. If a house burns down after the loan is

made, the lender cannot put the borrower in a squeeze by

accelerating the loan just because the collateral has been

destroyed. Likewise, when a recession reduces property values, the

borrower has a right to continue with an upside-down loan.

The perpetual requirements tend to be cornerstone

protections for borrowers. For example, home equity loans can only

be foreclosed judicially. Section 50(a)(6)(D). A lender cannot get a

personal judgment on the note, meaning the loan is non-recourse.

19
Sections 50(a)(6)(C). These and other provisions are existential

features of a Texas home equity loan. They represent a conclusive

pronouncement by Texans who voted to adopt Section 50 in 1997

that it does not help borrowers for such protections to be waived,

whether before or after origination. Non-judicial foreclosure and

personal-recourse are forbidden as long as the loan lasts because

they are intrinsic to what a Texas home equity loan is. See also,

e.g., Sections 50(a)(6)(F) (no open-end lending); Section 50(a)(6)(G)

(payable in advance without penalty); 7 Tex. Admin. Code §

153.14(2)(C) (2008) (modification cannot provide for terms that

would have been prohibited at closing).

The specific provision at issue here -- the prohibition on

payments that are not "substantially equal" -- is also a

cornerstone, perpetual provision. Section 50(a)(6)(L). If it did not

apply for the duration of the loan, but only at closing, borrowers

would go stand in a different line after closing to get lower

payments for the first few years, hoping that the future would

bring a job promotion or a winning lottery ticket. And borrowers in

a recession are even more likely to want "teaser" payments that,

for a time at least, make the loan affordable, only to generate

harsh "payment shocks" later. See generally Ann Graham, Where

20
Agencies, the Courts, and the Legislature Collide: Ten Years of

Interpreting the Texas Constitutional Provisions for Home Equity

Lending, 9 Tex. Tech Admin. L.J. 69, 84 (2007) (balloons and

teaser periods generating "shocking" payments are not permitted);

see also Olson, Paying Off the Mortgage, cited above ("Tapping into

home equity is one of the reasons older people run real risks of

foreclosure."). Section 50(a)(6)(L) doesn't assume that the best-case

scenarios in life always play out. It addresses the sober reality

that, sometimes, things fall apart. That's why, in the Section 50

world, payment shocks are always bad and substantially-equal

payments are a paramount consumer protection.

B. Section 50(a)(6)(L) prevents payment shocks in
multiple ways
Section 50(a)(6)(L) has three distinct components relevant to

this case:
The homestead . . . is hereby protected from forced sale,
for the payment of all debts except for . . . an extension
of credit that . . . is scheduled to be repaid . . . in
substantially equal . . . installments . . . .

The Texas Joint Financial Regulatory Agencies have issued

interpretive regulations that flesh out these requirements.

See Section 50(a)(6)(u) (referral of authority); 7 Tex. Admin.

Code § 153.1(1) (2015) (definition of balloon); 7 Tex. Admin.

21
Code § 153.11 (2008) (detailed regulations); 7 Tex. Admin.

Code § 153.16 (2004) (more detailed regulations).

1. "Scheduled" means the amortization of a
specific amount of principal and interest
The easy-to-overlook term "scheduled" is important. It

assumes an agreement by the parties on a specific amount of

principal and interest that establish the exact payment for three

decades. In the case of fixed-rate notes like those at issue here, the

"schedule" leaves no doubt what the payment is since all the

parameters are fixed -- the sum of principal and interest, the

interest rate, and the term. See 7 Tex. Admin. Code § 153.11

(regulation interpreting Section 50(a)(6)(L)). "Substantial

equality" is a foregone conclusion for fixed-rate notes that fully

amortize from inception. In the case of variable-rate notes,

"substantially equal" dictates a schedule of gradual steps or tiers

rather than large spikes in the interest rate or payment. See 7

Tex. Admin. Code § 153.16; see generally Cerda v. 2004-EQR1

L.L.C., 612 F.3d 781, 791 (5th Cir. 2010) (discussion of fixed and

variable rate home equity loans). Every schedule the parties agree

upon during the life of the loan has to feature "substantially

equal" payments in order for Section 50(a)(6)(L) to have teeth.

22
 2. "Repaid" means that every "installment"
must repay some principal
Payments that don't include any principal don't "repay" the

loan. All they pay is the lender's profit on the loan -- the interest.

Furthermore, interest-only payments don't repay the loan "in

installments" since principal doesn't kick in at all until years

later. When it does kick in, if the maturity date stays the same

then principal gets compressed into fewer payments, increasing

the amount of principal that must be included with each payment

following the period of interest-only payments. The regulations

address these related volatility concepts by concluding, sensibly,

that every installment has to include some principal. See 7 Tex.

Admin. Code § 153.11(3); 7 Tex. Admin. Code § 153.16(2). In

practice, this means that the numbers are plugged into standard

amortization calculators 7 that generate typical payment schedules

that steadily and gradually repay a loan.

The only case construing Section 50(a)(6)(L), a 5th Circuit

case, strongly affirms the requirement that principal be paid every

month as part of the package deal of requirements that prevent

payment shocks and payment volatility:
'[T]o have substantially equal installments would
require that some amount of principal must be reduced

7 Widely-used calculators are available at www.bankrate.com.

23
 with each installment. This effectively precludes the
permissibility of balloon payments.' (discussing Tex.
Const. art. XVI, § 50(a)(6)(L))). This construction gives
effect to both § 50(a)(6)(L) and (a)(6)(O) while still
offering three forms of protection to the borrower: (1) if
all payments are made according to schedule, the loan
will be fully extinguished; (2) at the end of the loan's
term, the borrower will not have to worry about
obtaining a second loan to satisfy the balloon payment;
and (3) the borrower will not be confronted with large
month-to-month variations in payment amount.
Cerda, 612 F.3d at 791 (quoting official regulatory commentary). It

is also apparent from this discussion in Cerda that the prohibition

on payment shocks must be perpetual since the emphasis is on the

loan being paid off at the end of its life.

3. "Substantially equal" does not allow a
sudden quadrupling of the monthly payment
The new payment schedules in Appellants' loan modifications

scheduled payments that dropped several-fold for a two-year

period -- the interest-only period -- and then jumped back up even

more after that -- when the new, higher principal sum kicked in

over a compressed time period until maturity. That degree of

volatility dispels any notion of "substantially equality" in this

case. The regulations define any payment more than double the

prior payments as a balloon -- the bellweather of payment shock --

and Appellants' payment jump far exceeded that. 7 Tex. Admin.

24
Code § 153.1(1).

Nationstar tries to minimize the obvious payment volatility

by simply ignoring the years of interest-only payments, arguing

that the payments following the interest-only period are only

slightly higher than the original payments. CR196-97. But a two-

year period is a significant period of the loan -- and in people's

lives. In several of the MDL cases, Nationstar strung modifications

together to create several years of declining payments, only to

generate an inevitable payment spike four years later. 8 In other

pending cases on the federal side, the interest-only period was 5

years. See Hawkins v. JP Morgan Chase Bank, N.A., No. 13-50086,

2015 WL 3505353, at *1 (5th Cir. June 4, 2015) (substituted op.

following grant of reh'g), motion to stay pending this case and

petitions for rehearing and rehearing en banc filed (June 9, 2015).

In principal, the interest-only payments could be for the life of the

loan, with a large balloon of the full principal due at maturity.

And while it's significant that nothing in Nationstar's

arguments forbid many years of interest-only payments, the

precise length of time that a borrower gets teaser payments is not

8In the MDL case Christian v. Nationstar, a series of modifications added
more than $60,000 to a loan that was originally $144,000 and resulted in a
several-fold increase in the payment after four years.

25
the salient inquiry: the "substantially equal" test asks how volatile

the payments are, not how many months of teaser payments are

allowed during recessions. Appellants' new payment schedules are

textbook examples of the volatility proscribed by Section 50, with

large payment spikes of several times the pre-modification

payment coming due abruptly after 24 interest-only payments.

Relatedly, Nationstar argues that "nothing . . . prohibits

lenders from temporarily reducing borrowers' monthly payments

so they can keep their homes," but of course that is precisely what

Section 50(a)(6)(L) facially prohibits. Temporarily-low payments

and payment volatility threaten people's homes, just not in a way

that they appreciate immediately. Section 50(a)(6)(L) abhors any

schedule, "temporary" or otherwise, that creates payment shocks.

Nationstar's argument for "temporary" relief proves too much,

since it would permit interest-only payments for both new

borrowers who could not otherwise afford the loan they want, and

struggling borrowers who can't afford the loan they already have.

The issue is not whether banks can help borrowers prevent

foreclosure, such as by rolling past-due sums into the note,

reducing interest rates, and extending the loan term: they can.

The issue is whether they can jury-rig exotic payment schedules

26
that generate payment shocks in the process: they can't.

4. Plaintiffs' amended payment schedules
violate Section 50(a)(6)(L) in multiple ways
While Appellants' original home equity loans had

substantially equal payments, their modifications amended away

the loans' compliance with Section 50(a)(6)(L) in the following

respects:

a. The modifications created new payment "schedules."

Since the principal and interest rate changed

dramatically relative to the original note, the loan

had to be reamortized, and a new schedule based on

the new parameters established. This is important

because the schedule set out in the original note was

entirely and irrevocably superseded once the

modifications substituted new and different ones

based on different assumptions.

b. The new payment schedule did not "repay" the loan

for the first two years because there was no principal

component to the payments for those years.

c. The payments were patently not "substantially

equal." They were highly volatile given the magnitude

of the payment variations, and in any event they

27
 created payment shocks at the conclusion of the

interest-only periods, when the interest rates and

payments quadrupled or quintupled.

d. The new schedules created "balloons" of more than

twice the prior "scheduled" payments, where

"schedule" logically refers to the new schedule, not

the superseded one that was based on a different set

of loan figures. See 7 Tex. Admin. Code § 153.1(1)

(definition of a balloon).

Section 50(a)(6)(L) is the last word on what "helps"

borrowers, and by definition any payment schedule at any point in

the life of the loan that runs afoul of Section 50(a)(6)(L) does not

"help" a borrower. That is why the regulations provide that

modifications cannot implement terms that would have been

forbidden on the closing date. 7 Tex. Admin. Code § 153.14(2)(C).

Payment shocks are a ticking time bomb and a direct threat to the

homestead, even if teaser periods seem helpful.

III. The trial court erred in concluding that Nationstar cured
the violations of Section 50(a)(6)(L)
Section 50(a)(6) has a cure scheme that allows the lender to

either cure voluntarily or else 60 days to cure upon notice from the

borrower. Section 50(a)(6)(L). A "cure" is a written notice

28
modifying a prohibited term to a legal term or refinancing the loan

to bring it into compliance. Section 50(a)(6)(Q)(x)(c); Section

50(a)(6)(Q)(x)(f). The cure cannot be worse than the disease -- the

borrower cannot be required to pay more than otherwise required

or pay any costs to get the cure. Id. Common sense dictates that a

cure has to put the borrower in no worse position.

A cure in this case was straightforward and would not have

cost Nationstar much if anything. All Nationstar had to do was get

rid of the payment spikes at the end of the interest-only period. It

is a given that Nationstar was willing to accept drastically lower

interest than the original note, so Nationstar cannot be heard to

complain about a variable rate. Nationstar should have

implemented a step-wise, gradual increase in both the interest

rate and the payments over a period of five years or so, whatever

would yield substantially equal payments from the baseline

established in the loan modifications. That's all that Section 50

requires, and it's all that Graze and Criddle seek for the proposed

class if the Court reverses the district court.

Surprisingly, Nationstar pled as an affirmative defense that

it did cure Appellants' loans. CR199-200. It asserts that certain

letters it sent to the borrowers in 2012 constituted preemptive

29
offers to cure. These are the notices that Nationstar sent to Graze

and Criddle informing them that their interest-only periods were

ending and that their interest-rates and monthly payments were

about to spike several-fold. App. 266, 321.

It was err for the trial court to conclude as a matter of law

that Nationstar's notice-of-payment shock letters cured the

violations of Section 50(a)(6)(L). These letters exemplify and

implement the illegality. These letters enact the moment of

payment shock agreed upon two years before. These letters call

due mid-schedule balloon payments that the borrowers couldn't

make and that would have led to foreclosure.

A cure would have informed the borrowers of the very

opposite of what these letters say. A cure would have told the

borrowers that to preserve payment equality, Nationstar had

taken it upon itself to reamortize the loan to do as follows:

• maintain the payment recited in the modification

agreements;

• pay some principal with every installment; and

• adjust the interest rate, maturity, and possibly the

principal to whatever would pay the loan off in

substantially equal installments.

30
 This is exactly what the borrowers later gave Nationstar the

opportunity to do when they sent Section 50(a)(6)(Q)(x) notices of

violation in early 2013. Nationstar, far from referring back to any

prior purported "cure," responded instead that it agreed with the

borrowers that their modifications were illegal! Yet Nationstar

took no action to undo the illegal payment schemes or even the

violation it told the borrowers it had committed. Under these

circumstances, the trial court's decision should be reversed, as

Nationstar not only did not cure, but disclaimed and declined any

cure.

PRAYER FOR RELIEF

This Court should reverse the trial court's judgment for

Nationstar and remand the case for further proceedings on

Appellants' claim for declaratory judgment and Nationstar's

remaining affirmative defenses. The Court should render judgment

in Graze and Criddle's favor on Nationstar's affirmative defense

that it cured the loans at issue since it would serve no purpose for

that meritless defense to be litigated further. T.R.A.P. 43.3; see

Double Diamond, Inc. v. Saturn, 339 S.W.3d 337, 347 (Tex. App.-

Dallas 2011, rev. denied) (rendering judgment is appropriate upon

reversal of a DJ on uncontested facts).

31
 Respectfully submitted,
/s/ JPS
J. Patrick Sutton
Texas Bar No. 24058143
1706 W. 10th Street
Austin Texas 78703
Tel. (512) 417-5903/Fax. (512) 355-4155
jpatricksutton@ jpatricksuttonlaw.com

Jeffrey W. Hurt, Esq.
Texas Bar No. 10317055
10670 N. Central Expy Ste 450
Dallas, Texas 75231
Tel: (214) 382-5656/Fax: (214) 382-5657
jwhurt@hurtberry.com

Attorneys for Appellants

CERTIFICATE OF SERVICE

I certify that on June 16, 2015, per T.R.A.P. 6.3(b), a true and
correct copy of this brief was served by efiling and email on:

Thomas G. Yoxall
Daron Janis B. David L. Foster
Locke Lord LLP Locke Lord LLP
2200 Ross Avenue Suite 2200 600 Congress Avenue, Suite
Dallas TX 75201 2200
tyoxall@lockelord.com Austin, Texas 78701
djanis@lockelord.com dfoster@lockelord.com

/s/ J. Patrick Sutton
Attorney for Plaintiffs-Appellants

32
 CERTIFICATE OF COMPLIANCE

This document complies with the typeface requirements of Tex. R.
App. P. 9.4(e) because it has been prepared in Century Schoolbook
14-point for text and 12-point for footnotes. Spacing is expanded
by .6 point for clarity. This document also complies with the word-
count limitations of Tex. R. App. P. 9.4(i), if applicable, because it
contains 5995 words, excluding any parts exempted by Tex. R.
App. P. 9.4(i)(1).

/s/ J. Patrick Sutton
Attorney for Appellants

33
 No. 03-15-00329-CV

In The Court of Appeals For the Third
District of Texas at Austin

GREGORY G. GRAZE AND CYNTHIA A. CRIDDLE, on behalf of
themselves and all others similarly situated,
Appellants,
v.
NATIONSTAR MORTGAGE, LLC,
Appellee.

On Appeal from the 261st District, Travis County, Texas
MDL Pretrial Court No. D-1-GN-14-005248
Dallas County Originating Case No. DC-13-05406
MDL No. 13-0427

APPELLANTS' APPENDIX

Appendix A: Trial court final summary judgment order
Appendix B: Tex. Const. art. XVI, § 50(a)(6)(A)-(Q)
Appendix C: 7 T.A.C. Ch. 153
Appendix D: Loan modification agreements
Appendix E: MDL orders consolidating cases (2013) and
appointing pretrial judge (2014)
APPENDIX A
 DC BK15147 PG348
Filed in The Dlstric~ Cou"'rt
of Travis countv, lel:.a"'
MAY 2 0 20i5
CAUSE NO. D-1-GN-14-005248 L.'\·.o, yr M.
At · t '"'I k
Velva L. Price, Oistnc \... er
MDL NO. 13-0427
INRE: § IN THE DISTRICT COURT OF
§
NATIONSTAR MORTGAGE, LLC § TRAVIS COUNTY, TEXAS
TEXAS HOME EQUITY LOAN §
MODIFICATION LITIGATION. § 261 sT JUDICIAL DISTRICT

Transferred from
CAUSE NO. DC-13-05406

GREGORY G. GRAZE AND § IN THE DISTRICT COURT OF
CYNTHIA A. CRIDDLE, on behalf of §
themselves and all others similarly §
situated, §
Plaintiffs, § DALLASCOUNTY,TEXAS
§
v. §
§
NA TIONSTAR MORTGAGE LLC, §
Defendant. § 160m JUDICIAL DISTRICT

FINAL JUDGMENT AND ORDER GRANTING
DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

On May 12, 2015, came on for hearing before the Court Defendant's Motion for

Summary Judgment (the "Motion"). Having considered the Motion, the response thereto, the

reply in support thereof, the evidence, the arguments of counsel, and all other material properly

before the Court, the Court concludes that Nationstar Mortgage LLC ("Defendant") is entitled to

judgment as a matter of law.

It is therefore ORDERED that the Motion is GRANTED. It is FURTHER ORDERED

that Plaintiffs Gregory Graze and Cynthia A. Criddle ("Plaintiffs") shall take nothing from

Defendant.

This is a final, appealable judgment that disposes of all claims in this case.

Page 1 of3
388
 DC BK15147 PG349

D-1-GN-1\.f-OOt)2..t-1$>
4-t:--):t£-
SIGNED this c1 v day of May, 2015.

VINGSTON

APPROVED AS TO FORM:

J. Patrick Sutton
State Bar No. 24058143
jpatricksutton@jpatricksuttonlaw. com
THE LAW OFFICE OF J. PATRICK SUTTON
1706 W. 1Oth Street
Austin, Texas 78703
(512) 417-5903
(512) 355-4155- Facsimile

Jeffrey W. Hurt
State Bar No. 10317055
jwhurt@hurtberry. com
HURT & BERRY, LLP
10670 N. Central Expy Suite 450
Dallas, Texas 75231
(214) 382-5656
(214) 382-5657- Facsimile

COUNSEL FOR PLAINTIFFS

Page 2 of3
389
 DC BK15147 PG350

B. David L. Foster
State BarNo. 24031555
dfoster@lockelord. com
LOCKE LORD LLP
600 Congress Avenue, Suite 2200
Austin, Texas 78701
(512) 305-4700
(512) 305-4800- Facsimile

Thomas G. Yoxall
Texas Bar No. 00785304
tyoxall@lockelord. com
Daron L. 1anis
State Bar No. 24060015
djanis@lockelord. com
LOCKE LORD LLP
2200 Ross A venue, Suite 2200
Dallas, Texas 75201
(214) 740-8000
(214) 740-8800- Facsimile

COUNSEL FOR DEFENDANT

Page 3 of3
390
APPENDIX B
 Tex. Const. art. XVI, § 50(a)(6)(A)-(Q) excerpts

(a) The homestead of a family, or of a single adult person, shall be, and is hereby
protected from forced sale, for the payment of all debts except for:
...
(6) an extension of credit that:
(A) is secured by a voluntary lien on the homestead created under a written agreement
with the consent of each owner and each owner's spouse;
(B) is of a principal amount that when added to the aggregate total of the outstanding
principal balances of all other indebtedness secured by valid encumbrances of record
against the homestead does not exceed 80 percent of the fair market value of the
homestead on the date the extension of credit is made;
(C) is without recourse for personal liability against each owner and the spouse of each
owner, unless the owner or spouse obtained the extension of credit by actual fraud;
(D) is secured by a lien that may be foreclosed upon only by a court order;
(E) does not require the owner or the owner's spouse to pay, in addition to any interest,
fees to any person that are necessary to originate, evaluate, maintain, record, insure, or
service the extension of credit that exceed, in the aggregate, three percent of the original
principal amount of the extension of credit;
(F) is not a form of open-end account that may be debited from time to time or under
which credit may be extended from time to time unless the open-end account is a home
equity line of credit;
(G) is payable in advance without penalty or other charge;
(H) is not secured by any additional real or personal property other than the homestead;
(I) is not secured by homestead property that on the date of closing is designated for
agricultural use as provided by statutes governing property tax, unless such homestead
property is used primarily for the production of milk;
(J) may not be accelerated because of a decrease in the market value of the homestead or
because of the owner's default under other indebtedness not secured by a prior valid
encumbrance against the homestead;
(K) is the only debt secured by the homestead at the time the extension of credit is made
unless the other debt was made for a purpose described by Subsections (a)(1)-(a)(5) or
Subsection (a)(8) of this section;
(L) is scheduled to be repaid:
(i) in substantially equal successive periodic installments, not more often
than every 14 days and not less often than monthly, beginning no later than
two months from the date the extension of credit is made, each of which
equals or exceeds the amount of accrued interest as of the date of the
scheduled installment;
...
(M) is closed not before:

Appendix B p. 1
 (i) the 12th day after the later of the date that the owner of the homestead submits a
loan application to the lender for the extension of credit or the date that the lender
provides the owner a copy of the notice prescribed by Subsection (g) of this section;
(ii) one business day after the date that the owner of the homestead receives a copy of
the loan application if not previously provided and a final itemized disclosure of the
actual fees, points, interest, costs, and charges that will be charged at closing. If a bona
fide emergency or another good cause exists and the lender obtains the written consent
of the owner, the lender may provide the documentation to the owner or the lender may
modify previously provided documentation on the date of closing; and
(iii) the first anniversary of the closing date of any other extension of credit described
by Subsection (a)(6) of this section secured by the same homestead property, except a
refinance described by Paragraph (Q)(x)(f) of this subdivision, unless the owner on oath
requests an earlier closing due to a state of emergency that:
(a) has been declared by the president of the United States or the governor as
provided by law; and
(b) applies to the area where the homestead is located;
(N) is closed only at the office of the lender, an attorney at law, or a title company;
(O) permits a lender to contract for and receive any fixed or variable rate of interest
authorized under statute;
(P) is made by one of the following that has not been found by a federal regulatory agency
to have engaged in the practice of refusing to make loans because the applicants for the
loans reside or the property proposed to secure the loans is located in a certain area:
(i) a bank, savings and loan association, savings bank, or credit union doing
business under the laws of this state or the United States;
(ii) a federally chartered lending instrumentality or a person approved as a
mortgagee by the United States government to make federally insured loans;
(iii) a person licensed to make regulated loans, as provided by statute of this state;
(iv) a person who sold the homestead property to the current owner and who
provided all or part of the financing for the purchase;
(v) a person who is related to the homestead property owner within the second
degree of affinity or consanguinity; or
(vi) a person regulated by this state as a mortgage broker; and
(Q) is made on the condition that:
(i) the owner of the homestead is not required to apply the proceeds of the
extension of credit to repay another debt except debt secured by the homestead or
debt to another lender;
(ii) the owner of the homestead not assign wages as security for the extension of
credit;
(iii) the owner of the homestead not sign any instrument in which blanks relating
to substantive terms of agreement are left to be filled in;

Appendix B p. 2
(iv) the owner of the homestead not sign a confession of judgment or power of
attorney to the lender or to a third person to confess judgment or to appear for the
owner in a judicial proceeding;
(v) at the time the extension of credit is made, the owner of the homestead shall
receive a copy of the final loan application and all executed documents signed by the
owner at closing related to the extension of credit;
(vi) the security instruments securing the extension of credit contain a disclosure
that the extension of credit is the type of credit defined by Section 50(a)(6), Article
XVI, Texas Constitution;
(vii) within a reasonable time after termination and full payment of the extension
of credit, the lender cancel and return the promissory note to the owner of the
homestead and give the owner, in recordable form, a release of the lien securing the
extension of credit or a copy of an endorsement and assignment of the lien to a
lender that is refinancing the extension of credit;
(viii) the owner of the homestead and any spouse of the owner may, within three
days after the extension of credit is made, rescind the extension of credit without
penalty or charge;
(ix) the owner of the homestead and the lender sign a written acknowledgment as
to the fair market value of the homestead property on the date the extension of
credit is made;
(x) except as provided by Subparagraph (xi) of this paragraph, the lender
or any holder of the note for the extension of credit shall forfeit all
principal and interest of the extension of credit if the lender or holder fails
to comply with the lender's or holder's obligations under the extension of
credit and fails to correct the failure to comply not later than the 60th day
after the date the lender or holder is notified by the borrower of the
lender's failure to comply by:
(a) paying to the owner an amount equal to any overcharge paid by the
owner under or related to the extension of credit if the owner has paid an
amount that exceeds an amount stated in the applicable Paragraph (E), (G),
or (O) of this subdivision;
(b) sending the owner a written acknowledgement that the lien is valid only
in the amount that the extension of credit does not exceed the percentage
described by Paragraph (B) of this subdivision, if applicable, or is not secured
by property described under Paragraph (H) or (I) of this subdivision, if
applicable;
(c) sending the owner a written notice modifying any other amount,
percentage, term, or other provision prohibited by this section to a
permitted amount, percentage, term, or other provision and
adjusting the account of the borrower to ensure that the borrower is
not required to pay more than an amount permitted by this section
and is not subject to any other term or provision prohibited by this
section;
(d) delivering the required documents to the borrower if the lender fails to
comply with Subparagraph (v) of this paragraph or obtaining the appropriate

Appendix B p. 3
 signatures if the lender fails to comply with Subparagraph (ix) of this
paragraph;
(e) sending the owner a written acknowledgement, if the failure to comply is
prohibited by Paragraph (K) of this subdivision, that the accrual of interest
and all of the owner's obligations under the extension of credit are abated
while any prior lien prohibited under Paragraph (K) remains secured by the
homestead; or
(f) if the failure to comply cannot be cured under Subparagraphs
(x)(a)-(e) of this paragraph, curing the failure to comply by a refund
or credit to the owner of $1,000 and offering the owner the right to
refinance the extension of credit with the lender or holder for the
remaining term of the loan at no cost to the owner on the same
terms, including interest, as the original extension of credit with any
modifications necessary to comply with this section or on terms on
which the owner and the lender or holder otherwise agree that
comply with this section;
...

Appendix B p. 4
APPENDIX C
 7 T.A.C. Ch. 153 Excerpts

7 T.A.C. § 153.1(1) (2015)
Balloon--an installment that is more than an amount equal to twice the
average of all installments scheduled before that installment.

7 T.A.C. § 153.11 (2008)
Unless an equity loan is a home equity line of credit under Section 50(t),
the loan must be scheduled to be repaid in substantially equal
successive periodic installments, not more often than every 14 days and
not less often than monthly, beginning no later than two months from
the date the extension of credit is made, each of which equals or exceeds
the amount of accrued interest as of the date of the scheduled
installment.
...
(3) For a closed-end equity loan to have substantially equal successive
periodic installments, some amount of principal must be reduced with
each installment. This requirement prohibits balloon payments.

7 T.A.C. § 153.14 (2008)
...
(2) Section 50(a)(6)(M)(iii) does not prohibit modification of an equity
loan before one year has elapsed since the loan's closing date. A
modification of a home equity loan occurs when one or more terms of an
existing equity loan is modified, but the note is not satisfied and
replaced. A home equity loan and a subsequent modification will be
considered a single transaction. The home equity requirements of
Section 50(a)(6) will be applied to the original loan and the subsequent
modification as a single transaction.
(A) A modification of an equity loan must be agreed to in writing by
the borrower and lender, unless otherwise required by law. An example
of a modification that is not required to be in writing is the modification
required under the Soldiers' and Sailors' Civil Relief Act.

Appendix C
7 T.A.C. 153 p. 1
 (B) The advance of additional funds to a borrower is not permitted by
modification of an equity loan.
(C) A modification of an equity loan may not provide for new terms
that would not have been permitted by applicable law at the date of
closing of the extension of credit.
(D) The 3% fee cap required by Section 50(a)(6)(E) applies to the
original home equity loan and any subsequent modification as a single
transaction.

7 T.A.C. § 153.16 (2004)
A lender may contract for and receive any fixed or variable rate of
interest authorized under statute.
(1) An equity loan that provides for interest must comply with
constitutional and applicable law. Interest rates on certain first
mortgages are not limited on loans subject to the federal Depository
Institutions Deregulation and Monetary Control Act of 1980 and the
Alternative Mortgage Transaction Parity Act. Chapter 342 of the Texas
Finance Code provides for a maximum rate on certain secondary
mortgage loans. Chapter 124 of the Texas Finance Code and federal law
provide for maximum rates on certain mortgage loans made by credit
unions. These statutes operate in conjunction with Section 50(a) and
other constitutional sections.
(2) An equity loan must amortize and contribute to amortization of
principal.
(3) The lender may contract to vary the scheduled installment amount
when the interest rate adjusts on a variable rate equity loan. A
variable-rate loan is a mortgage in which the lender, by contract, can
adjust the mortgage's interest rate after closing in accordance with an
external index.
(4) The scheduled installment amounts of a variable rate equity loan
must be:
(A) substantially equal between each interest rate adjustment; and

Appendix C
7 T.A.C. 153 p. 2
 (B) sufficient to cover at least the amount of interest scheduled to
accrue between each payment date and a portion of the principal.
(5) An equity loan agreement may contain an adjustable rate of
interest that provides a maximum fixed rate of interest pursuant to a
schedule of steps or tiered rates or provides a lower initial interest rate
through the use of a discounted rate at the beginning of the loan.

Appendix C
7 T.A.C. 153 p. 3
APPENDIX D
LOAN MODIFICATION A.GRP:EMENT- C"'' Fimi!Tcmp 10) 11111812410 (pozd •J J)

_ _ _ _ _ _ _ _ _ _ _ _ _ [Space Above This Line For Recording Data} _ _ _ _ _ _ _ _ _ _ __

Loan#:~58S

LOAN MODJFICATION AGREEMENT
(Providing for Interest Only Payments and Fixed Interest Rare)

Thia Loan Modification Agreement {"Agreement"), made this 18th day of October, 2010 , between Gregory G. Graze
("B<>rrower'') and Nationstar Mortgage LLC formerly known as Centex Home Equity Company ("Lender"), amends and
supplements (I) the Mortgage, Deed of Trust, or Security Deed (the "Security Instrument"), and Timely Payment Rewards Rider, if
any, dated September 18, 2003 and recorded in Book or Libcr , at page(s) , of the
----.;---::::--:-:-------Records of ----:-::---:-:----:--:--:-::c-.--:----
tName of Records) (County •nd State. or other Juri &diction)
and (2) the Note, bearing the same date as, and secured by, the Security Instrument, which covers the real and personal property
desc:ribcd in the Security Instrument and defined therein as the "Property", located at

6722 Orchid Lane Dallas Tx 75230
(Propetty AddrenJ

the real property dcsclibed being set forth as follows:

In consideration of the mutual promises and agreements exchanged, the parties hereto agree as follows (notwithstanding
anything to the contrary contained in the Note or Security Instrument):

1. As of December 0 I, 2010 , the amount payable under the Note and the Security Instrument (the "Unpaid Principal Balance'') is
U.S. $ 295,961.53 • consisting of the unpaid amount(s) loaned to Borrower by l.cndcr plus any interest and other amounts
capitalized.

2. lJorrowcr promises to pay the Unpaid Principal Balance, plus interest, to the order of Lender. Interest will be charged on the
Unpaid Principal Balance at the yearly rate of 2 %. from November 0 I, 2010 . Borrower promises to make monthly payments of
interest of U.S.$ 493.27 , beginning on the 1st day of December. 2010 • and continuing thereafter on the same day of each
succeeding month until November 01, 2012 (the "Interest Only Period"). Thcr<:aftcr, Borrower shall make payments of principal
and interest of U.S.$ 2,159.71 based on the yearly rare of 6.5 %, which will remain in effect until principal and interest arc paid
in full. If on October 01. 2033 (the "Maturity Date"), Borrower still owes amounts Wlder the Note and the Security Instrument. as
am~nded by this Agreement. Borrower will pay these amounts in full on the Maturity Date.

3. failure to Timely Remit Paymems· If at any lime during the effective dates of this Modification Agreement the Borrower fails ro
timtly rnnke payments as specified hereinabove and such default or failure continues for more than thirty (31) days, then this
MOdification Agreement, at the option of Lender, shall terminate and all terms of the Note as origina!ly executed shall be reinstated in
full, effective as of the date of this Modification Agreement, and the amounts due and payable under the terms of the Note shall be as
oriainally stated therein, as if this Modification Agreement had never existed. Time is of the essence with regard to all payments
specified hereunder. Nothing contained herein shall prevent or preclude Lender from enforcing any of Lender's rights or remedies
under the Note, or under any document or instrument evidencing or securing the indebtedness created by or under the Note, or shall
be c:onstrued as a waiver of any of Lender's rights or remedies !hereby created.

4. If all or any part of the Property or any interest in the Property is sold or transferred (or if Borrower is not a natuml person and a
beneficial interest in Borrower is sold or transferred) without Lender's prior written consent, Lender may require immediate payment
in full of all sum5 secured by the Security Instrument

If Lender exercises this option, Lender shall give Borrower notice of accelemtion. The notice shall provide a period of not less than
30 <.lays from the date the notice is delivered or mailed within which Borrower must pay all sums secured by the Security Instrument.
If 8orrower fails to pay these sums prior to the expiration of this period. Lender may invoke any remedic.~ permilled by the Security
Instrumctl! without further notice or dcmilnd on Borrower.

MDL Nationstar_Graze 000031 245
D.Appx. 44
'(

LOAN MODIFICATION AGREEMENT- Cop Fi>nditions contained in the Security Instrument relating to default
in !he making of payments under the Security Instrument shall also apply to default in the making of the modified
payments hereunder.

(b) All covenants, agreements, stipulations, and conditions in the Note and Security Instrument shall be and
remain in full force and effect, except as neTein moditied, and nom: <>f lhe Bmrower'r. obligations or liabilities
under the Note and Security Instrument shall be diminished or released by any provisions hereof, nor shall this
Agreement in any way impair, diminish, or affect any of Lender's rights under or remedies on !he Note and
Securily Instrument, whether such rights or remedies arise thereunder or by operation of law. Also, all rights of
recourse to which Lender is presently entitled against any property or any other persons in any wny obligated for, or
liable on, the Note and Security Instrument are expressly reserved by Lender.

(c) Borrower has no right of set-off or counterclaim. or any defense to the obligations of the Note or Seeurity
Ins!rument.

(d} N(){hing in this Agreement shall be undernuod or cunstrued to be a satisfaction or release in whole or in part of
the Note and Security Instrument.

(e) All costs and ~:Xpenses incurred by Lender in connection with this Agreement, including recording fees. title
examination, and attorney's fees, shall be paid by the Borrower and shall he secured by the Security Instrument.
unless stipulated otherwise by Lcndc:r.

(f) Borrower agrees to make and execute such o!her documents or papers as may he necessary or required to effectuate
the terms and conditions of this Agreement which, if approved and accepted by Lender, shall bind and inure to the heirs.
executors, administrators, and assigns of the Borrower.

____________________ (S~)

By:
-Borrower

STATEOF -rc'{.__
)SS.
COUNTYOF ~\~ )

On the day of D~ ,~ personally appeared
- - - - - - - - - - - - - - - - - - - - ' personally known to me (or proved to me on the basis of satisfactory
before me

evidence) to be the pcrson(s) whose name(s) is/are subscribed to the within instrurne wled ed to me t t hc/shcltiljChe~OC::q
executed tlte same in his/her/their authorized capacity(ies), and that by his/her/their si
the entity upon behalf of which the person(s) acted, executed !he instrument.
Notary Public
STATE OF TEXAS
My Comm. Exp. 07-09-13
Notary Public
_ _ _ _ _ _ _ _ _ _ _ _ {Space Below This Line for Acknowledgements] _ _ _ _ _ _ _ _ _ _ __

MDL Nationstar_Graze 000032 246
D.Appx. 45
APR-27-2010 17:45 From: To:99722891382

l
____________ (SpaceAbo~l! This Line for Rcconllng Data) _ _ _ _ _ _ _ _ _ __

Loao#:~090

LOAN MODIDCATION AGREEMENT
(Providing for J.oterett Only Payments and Fixed J.ot"rest Rate)

This Loan Modification Agreement ("Agreement"), made !hi~ 27tb day or
April, 2010 , between Charles A. Criddle and
Cyz;~t.b.ia
A. Cri.ddle ("Bon ower") and Natioostar Mortgage LLC ("Lendu'), amends and supp)ecnenl$ ( 1) the Mortgage, Deed of
Trust, or Security Deed (lhe "Security lnstrument"), and 'l'imely Payment Rewards Rider, if any, dated December 21, .2006 and
recorded in Book or Libet at pa&e(s) of lhe Records
of
----,("'N;-am-,-o-:l;:.R;-e.:::or:::d::s);------------ (County IUid Sllll•, or Olll.~ Jullsdietion)
and (2) the Noto:o, bcarin.g the same date as, and secured by, the Security lnS!nuru:nt, which coven the real and personal property
described in the Security Instrument and defined lherein as the "Property", located at

2705 Brushy Creek Trail Me¥ quite Tx 751 Sl
(Pn;>porty AddR:u)

the real property described being se1 forth as follows:

In consideration of lhe mutual promises and agreements exchanged, the partie$ hereto a~ as follows (notwithstonding
anylbing to the contruy contained U. tll.e Note or Security Instrument):

L As of June 01, 2010 • the amou11t payable undu the Note and the Security Instrument (the "Unpaid Principal .Balance") is U.S.
S 106,453.51 , consistina of !he unpaid arno~ant(s) loanl:d to Borrower by Lender plus any interest and o!het amount$ capitalized.

l. Borrower promise~ to pay the Unpaid Principal Balance, plus interest, to the order of Lender. Intaest wiU be charged on the
Unpaid Principal Balance at the yearly rate of 2 %, trom May 01, 2010 . .Borrower promises to make roonthly paymeuts of
interest ~;~f U.S. S 177.42 • beainning on the 1st day of June, 2010 , and continuing lherea.fh:r on the same day of each succeeding
.month until May 0 I , 2012 (thE "Inwest Only Period"). Thereafter, Borrower shall mue paymenlS of principal and interest of
U.S.$ 910.43 based on the yearly rate of 9.l9 %, which wiU R!m.ain in effect until principal and interest Me paid in full. If on
January 0), 2037 (the "Maturity Oate"), Borrower still ow& amounts under the NQte and the Security lmttument, as amended by
this Agreemenl, Borrowu will pay !helle amounu. in full on the Maturity Date.

3. Faj!we to Iimdy Remit P!!'tliiAAU.: If at any time during tbe effective dates of this Modification Agreement tbe Bortowcr fail& to
timely mu~ payments as specifleii ltereinabove and such default or failure continues for more than thirty (31) days, then thi'
Modification Agree:me.nt, at the option of Lender, shall terminate and all terms of the N~e u originally executed shall be reinstated in
full, eticctive as of the date of thiJ Modification Agrel!:lllrot, and the amounts due and payable under tbe tenns of lh~ Note 1hall be aa
origiM!ly stated therein, as if this Modification Agreell)ellt bad .oever el!.isted. Time is of tbe cs..o;ence ~lh regard to all payments
spox;ified hereunder. Nothing cont;;ined herein shaU preVI!!I;lt w preclude Lender from enforcing any of Lender's rights or remedies
under the Note, or under any do<:ulll.ent or ins!l'\llllent evideo.cina or securing the indebtedness c:retlcd by or under theo Note, or shall
be construed a$ a waiveT of any of L~nder's rights or remedies thereby (teated.

4. If all or any part of lhe Property or any interest in the Property is sold or transferred (or if BOITOWer is not a natural person and a
beneficial interest in Bonower is wtd or transf=d) without Lendet's prior wzitten consent, tender may requiRI immediate paylllent
in fuU of all s~ ~ed by the Seturlty Instrument.

If Lender exucises this option, Lender shaU give BoJroWer notice of acceleration. the notice shall provide a period of not le:!ll than
30 days from the date the notice is Gelivered or mailed within which BorTower must pay all sums se~;Ured by the Security Instrument
If Borrower fails 10 pay W$e 5um5 prior to the expillltion of this period, Lender rn"y invoke any remedies pennined by the Security
ln~tJUmcnt without (\!tiber notice or demmd on BorroweT.

MDL Nationstar Criddle 000032 302
- D.Appx. 101
APR-a7-2010 17:45 From: To:99722001382

o•mno1o fJ1ai:1 %4/1;
Loanrt:_.JO

S. ao:rrower al$o will e:oJ»;~ly with all other covenan\8, &&r~cnlli, 1llld n:qu~m.ents of the S«urity I!Wnlmmt, including without
Jirnitation, 3orrowO!I'S covenants aod agreemeniS to make all payment~ of taxes, insuuDce premium$, ~entJ, IO$CCOW ite.ms,
impounds, and all other payments that Borrower is obligated to IIU!ke ui\Cle~: !he Security In.~ttuJnQJlt.

(a) All the righu and remedies, stipulalion5, m~d conditiOO!l contained in the Security In~trument telating t() default
in flit< maki.ag o{ paymeats Wid~ the 5~1)' I~trument ~haU ~ ilpp!y to defawt in the making of 1he modified
paymtood or construed to be a satist'action or release in wbole or in p:u'l of
rhe Nole md Security lnnrument.

(e) All CO$ts and expenses incurred by Lender in connection wilh thi~ Agret!lllent, including recording fees, title
clllllnination, and anorney's ftes, ~hall be paid by the Borrower and 5h111l be secun:d by the Secutity Instrument,
unless stipulated oth~c by Lender.

(f) Boxrowu agn:ea to make and li'liCWto sud\ other Qll<:\lllllmt& or papcn; ~ IIUIY be necessary or required to effr:ctualll
the tetlllS and condition.~ of this Apumm.t which, if approved and accepted by Lenda, slusll bind end inure to the heir!,
executors, administrator;, and a.ssiltlls otthe BQxrower.

(SIIlll) ~.Aut __ (Seal)

""""'""Mort&~
Chllrles A. Criddle -Botrowe:

By: ~
STATEOF~~
coUNTY OF ffi.\_, \_(L_S )SS.
)

0J On ~ ~&:' ~Y , of Apr l l --·· .._, ()C>i 6 per$onally ~:~ppe~d before me
~MD\ 0... ~ , ~ \ <:icl\!D , personally known to me (or proved to roe on the basis of satisfactory
eviden~e) to ~ the pen>on($) whO$c J>ame(:<) illfare subscribed to the within instrnmmt and acknowledged to me that hel!ibe:lthey
e~ecut¢<1 !he $&me in hislh~/lhcir authcm