“[A]s long as the original note is not satisfied and replaced, and there is no additional extension of credit, as we define it, the restructuring is valid and need not meet the constitutional requirements for a new loan.”

This phrase at the opening of the Texas Supreme Court’s opinion in Sims v. Carrington Mortgage Services, LLC sums up the Court’s rationale for allowing modifications of Texas home equity loans without having to first navigate the many onerous and time-consuming requirements for the origination of these loans.

Texas has a long-standing tradition of protecting the homestead. Some would say that the first Anglo settlers of the region came precisely to avoid the debts they had incurred “back east” and, once here, saw to it that they would not again be faced with losing their homes. That mentality led to Texas’ strong protection of the homestead against any claims by creditors against the homeowner. As a result, Texas was the last state—in 1998—to permit homeowners to take out home equity loans. But even then, the conditions for taking out the loan were strict and rigorous.

Publisher: Mark Cronenwett, Esq; Mackie Wolf Zientz & Mann, PC
Date: June 3, 2014
Format: White paper