NO. DC-13-05406-H
GREGORY G. GRAZE § IN THE DISTRICT COURT OF
Plaintiff, §
§
V. § DALLAS COUNTY, TEXAS
§ NATIONSTAR MORTGAGE, LLC §
Defendant. § 160th JUDICIAL DISTRICT
PLAINTIFF'S 1ST AMENDED CLASS ACTION PETITION
Plaintiff Graze, by and through his attorneys, brings this action on behalf of himself and all others similarly situated as against Nationstar Mortgage, LLC.
Plaintiff complains of Nationstar's practice of modifying and refinancing Texas home equity loans without complying with Tex. Const. art. XVI Section 50 ("Section 50").
NOTICE OF CURE PERIOD AND FORFEITURE UNDER TEX. CONST. ART. XVI § 50 ("Section 50")
The service of this Class Petition, amending a prior Original Petition, constitutes notice, to the extent required, under Tex. Const. art. XVI § 50(a)(6)(Q)(x), of Defendant Nationstar's violations of Section 50(a)(6)(A)-(Q) stemming from new extensions of credit and schedules of interest-only payments or balloon payments to members of the proposed class. Accordingly, Defendant Nationstar has sixty (60) days from the date of receipt of this Notice and Petition to cure said violations in accordance with Section 50(a)(6)(Q)(x). Graze notified Nationstar more than 60 days prior to the filing of this suit, and Nationstar failed to cure, resulting in forfeiture.
Filed
13 September 23 A8:48 Gary Fitzsimmons District Clerk Dallas District
Plaintiff hereby alleges, on information and belief (except as to those allegations which pertain to the named Plaintiff, which allegations are based on personal knowledge) as follows:
I. INTRODUCTION:
A. ADDING NEW PRINCIPAL TO A TEXAS
HOME EQUITY LOAN REQUIRES A FULL-BLOWN REFINANCE
1. The Republic of Texas created the concept of homestead protection in 1839. When Texas entered the union, it put homestead protection in its constitution.
Foreclosures on homesteads are forbidden unless a constitutional exception applies. This lawsuit concerns a lender that ignored the Texas Constitution's homestead provisions when it (a) loaned more money purported to be collateralized by additional borrower home equity and (b) employed interest-only and balloon-note provisions to conceal the new additions to principal.
2. Home equity loans specifically weren't permitted by the Texas Constitution until 1997. The requirements are strict, and the penalty for lender noncompliance is loan forfeiture if the lender refuses to cure within sixty days after receiving notice. If a lender has a system-wide practice or form that does not comply with Texas Constitution, and the lender makes the same mistake with every loan, every lien is invalid and all the loans must be cured or else they are forfeited.
3. The 1997 Constitutional amendments reflect the judgment of the people of Texas that allowing home equity to be used as collateral should be difficult so that Texans don't lose their homes for the sake of non-homestead purchases. Therefore, a lending practice such as repeatedly taking available home equity to pay loan interest, property taxes, insurance, and other charges, and correspondingly increasing home
equity loan principal, is not allowed. Adding principal to an existing home equity loan and thereby collateralizing additional amounts of home equity requires a Section 50-compliant refinance of the loan, entailing all the forms and formalities of a new home equity loan.1 Otherwise, lenders and borrowers could sidestep restrictions such as the maximum loan-to-value ratio of 80%, the once-yearly limitation on refinancing, and the prohibition on open-end forms of credit that never get paid down. Home equity would drop to zero or even negative numbers; principal would constantly go up without limitation.
4. In addition to past-due interest getting transformed into principal and beginning to incur interest of its own, Nationstar paid property taxes and insurance for the borrower then loaned those sums back to the borrower using borrower home equity as collateral, thereby creating new loan principal that earns interest. In still other cases, borrowers got an advance from Nationstar to pay future taxes and insurance, and that loan, too, earns interest for the life of the new loan. Either way, the borrowers got loans of new monies collateralized by their homesteads.
5. This proposed class action contends that the principal of a Texas home equity loan can only go down unless the requirements of Tex. Const. Art. XVI Secs. 50(a)(6)(A)-(Q) are met each time the principal goes up.
6. Between 2007 and 2012, Nationstar extended new credit to Texas home equity borrowers via transactions on short forms styled as "modifications." These
misnomer "modifications" were in fact new loans to the borrowers that paid off past-due interest, property taxes, insurance, and sometimes funded future interest and escrows,
1 Mortgage loans used for the purchase of a home in the first instance are not at issue in this case.
by collateralizing more borrower home equity and increasing loan principal
correspondingly. These "modifications" were effected on a few standard forms, such as the in-house modification form that Plaintiff herein received and also the federal Home Affordable Modification Agreement form. This process postponed foreclosure and
increased the size of each borrower's loan principal. Borrowers commenced paying interest on the past-due interest or on future interest that was rolled into the loan, as well as on any property taxes and insurance (1) that Nationstar had already paid to third parties on behalf of the borrower or else (2) for which Nationstar used loan proceeds to fund escrows for future property taxes and insurance.
7. As a consequence of collateralizing more home equity and increasing loan principal without observance of Section 50, some of the modifications blew through the 80% value ratio restriction of Section 50(a)(6)(B), yielding loans with loan-to-value ratios exceeding 80% and often exceeding 100%. Nationstar had thus undermined a central consumer protection feature of Section 50(a) as a consequence of monetizing additional home equity into new principal.
8. In addition, Nationstar's almost total failure to observe Section 50 meant that borrowers who got bigger loans and collateralized more of their home equity did not get all the mandatory disclosures explaining Section 50 to them, as set out at Section 50(g).
9. A violation of any one of Section 50(a)(6)'s requirements results in the lender's forfeiture of the loans and/or inability to enforce the lien if the lender does not cure deficiencies within sixty days of receiving notice of same. Examples of violations that prevent a lien from attaching are:
• failure to declare in the security instrument that the loan is made under
Section 50;
• failing to get the borrower's written acknowledgement of fair market
value;
• not conducting a closing at a lender's, title company's, or lawyer's office; • not providing the disclosures set out at Section 50(g);
• exceeding an 80% loan-to-value ratio.
B. HOME EQUITY LOANS CANNOT HAVE AN INTEREST-ONLY SCHEDULE OF PAYMENTS OR A BALLOON
10. In addition to collateralizing additional home equity and increasing home equity loan principal without Section 50 compliance, Nationstar also modified home equity loans to schedule payments of interest only, with no principal component, thereby concealing large increases to principal. This occurred with Plaintiff. Interest-only loans violate Section 50(a)(6)(L) because they prevent payments from being substantially equal and prevent the loan from being fully-amortizing from inception. In some cases, they create balloons (defined in the regulations as twice the monthly payment) following the end of the interest-only period.
11. Nationstar also modified Texas home equity loans to feature balloons at maturity, also in violation of Section 50(a)(6)(L). Balloons also prevent payments from being substantially equal and from fully amortizing the loan from inception.
C. CLASS ACTION FOR PRINCIPAL INCREASES AND INTEREST-ONLY VIOLATIONS OF SECTION 50
12. Plaintiff victim of Nationstar's practices therefore brings this action
received from Nationstar, acting as the "Lender" or otherwise in the capacity as Lender: (1) "modifications" that increased home equity loan principal, and (2) modifications that do not schedule any principal as part of the monthly payment or that feature balloons.
13. Plaintiff seeks enforcement of Section 50's cure and forfeiture provisions on behalf of the Class. The relief encompassed by cure and forfeiture includes forfeiture of loans; formal releases of invalidated liens; a payment by Defendant of $1,000.00 per loan; a refinance, modification, or cure that otherwise complies with the Texas
Constitution; disgorgement of all payments made by borrowers under the illegal home equity loan modifications (subject to any applicable statute of limitations and
subrogation requirements); credits back or payment to borrowers of interest and charges incurred by or assessed against class members during the pendency or processing of the illegal loan modifications; a permanent injunction halting foreclosures on class
members' homes; a permanent injunction against any other collection efforts against these class members' home equity debt; costs and expenses, including attorney's fees and expert fees; and any additional relief that that Court determines to be necessary to comply with Section 50.
II. DISCOVERY CONTROL PLAN
14. Discovery is intended to be conducted under a Level 3 plan. III. PARTIES
15. Plaintiff Gregory G. Graze is an individual whose address is 6722 Orchid Lane, Dallas, Dallas County, TX 75230.
16. Defendant Nationstar Mortgage, LLC ("Nationstar"), a foreign limited liability company organized and existing under the laws of the State of Delaware, whose
home-office address is 350 Highland Drive, Lewisville, Denton County, Texas 75067, has been served with process and has answered.
IV. JURISDICTION AND VENUE
17. The subject matter in controversy is within the jurisdictional limits of this court.
18. Per Tex. R. Civ. P. 47, this suit seeks monetary relief over $1,000,000 and non-monetary relief.
19. This court has jurisdiction over Defendant Nationstar because said Defendant purposefully availed itself of the privilege of conducting activities in the state of Texas and established minimum contacts sufficient to confer jurisdiction over said Defendant, and the assumption of jurisdiction over Nationstar will not offend traditional notions of fair play and substantial justice and is consistent with the constitutional requirements of due process.
20. Furthermore, Defendant Nationstar has its headquarters and principal place of business in Lewisville, Texas, and at all times relevant hereto engaged in activities constituting business in the state of Texas as provided by Section 17.042 of the Texas Civil Practice and Remedies Code, in that said Defendant contracted with a Texas resident and performance of the agreement in whole or in part thereof was to occur in Texas.
21. Venue in Dallas County is proper in this cause under Section 15.011 of the Texas Civil Practice and Remedies Code because the Graze homestead is located in Dallas County.
22. The motion to transfer involving this case was filed with the Judicial Panel on Multidistrict Litigation in Docket No. 13-0427, styled In re Nationstar Mortgage, LLC
Texas Home Equity Loan Modification Litigation. The effect on a trial court of the filing of a motion for transfer is discussed in Rule 13.4, Rule of Judicial Administration. On August 16, 2013, the MDL Panel granted the motion to transfer. However, the MDL Panel has not yet appointed the pre-trial judge. Plaintiff will file a notice of transfer in the prescribed manner when appropriate.
V. ACTS OF AGENTS
23. Whenever in this Petition it is alleged that Defendant did any act, it is meant that Defendant performed or participated in the act, or the officers, agents, or employees of Defendant performed or participated in the act, with the actual, vicarious, or imputed authority of Defendant.
VI. CONDITIONS PRECEDENT
24. All conditions precedent to the filing of this case have been performed, have occurred, or have been satisfied.
VII. FACTS
A. NATIONSTAR'S TEXAS HOME EQUITY LENDING AND LOAN SERVICING
25. Nationstar serviced Plaintiff's Texas home equity loan as well as the home equity loans of thousands of other Texans.
26. Nationstar used computer information systems to automate its loan servicing of Texas home loans.
27. Nationstar used forms styled as "modifications" in its mortgage loan servicing in Texas, for both purchase-money mortgages and home equity loans. These forms included two-page and three-page forms like those used for Plaintiff. Nationstar was expressly named as the "lender" on these forms.
28. Nationstar, as "Lender," used these forms to enter into agreements with hundreds or thousands of Texas home equity loan borrowers who had interest arrears and unpaid escrows, including property taxes and insurance. Some or all of these agreements loaned the borrowers the money to pay those interest arrears and unpaid escrows, as well as sums for future property taxes and insurance, by collateralizing additional borrower home equity and creating new, increased home equity loan principal. The "modifications" are in substance notes.
29. As of the effective dates of these agreements, the interest arrears and sums to pay property taxes and insurance began incurring interest as new home equity loan principal, which those sums had not done previously and would never have done had they not been transformed into principal. Borrowers had given up more home equity to get a bigger loan.
30. The forms Nationstar used do not contain express citations or references to the Texas Constitution, in contrast to the original home equity loans' standard-form notes and security instruments, which extensively cite and reference Section 50.
31. Nationstar has acknowledged that it is illegal to modify a Texas home equity to add principal. It wrote to Plaintiff Graze on February 26, 2013, stating as follows:
In accordance with The Constitution of the State of Texas, modifications which increase the unpaid principal balance and/or extend the loan term are prohibited. For this reason, a loan modification under the Homes Affordable
Modification Program (HAMP) or any other amendment to the Note which modifies the payment by incorporating the aforementioned cannot be offered.
32. Nationstar repeated this same statement to Graze two months later and misrepresented the effective date of Section 50 (which was adopted in 1997):
Please note your loan modification was approved in 2010 was valid; however as of 2012 it was determined the loan originated as a Texas Home Equity, resulting in an
extension of credit. In accordance with The Constitution of the State of Texas, modifications which increase the unpaid principal balance and/or extend the loan term, as is the case with Texas Home Equity loans, are prohibited. For this reason, a HAMP modification, or any other amendment to the Note, which modifies the payment by incorporating the aforementioned, cannot be offered. With a different
borrower, who notified Nationstar that an interest-only schedule of payments violated Section 50(a)(6)(L),
Nationstar likewise admitted the illegality of interest-only payments.
33. Internal underwriting documents similarly show Nationstar admitting it made new loans when it modified loans to increase the principal balance. For example, Nationstar's underwriting process categorized modifications as "original loans." These "original loans" were computed to have their own, new loan-to-value ratios that
included new additions to principal as well as new "origination dates."
34. Nationstar has also admitted in letters to borrowers that interest-only schedules of payments violate Section 50.
35. Nationstar sometimes did four or more modifications of a given loan over a period of months or years, resulting in principal far exceeding or even doubling the original note, loan-to-value ratios exceeding 100%, and doubling, tripling, or
quadrupling of payments.
B. THE TEXAS CONSTITUTION'S HOMESTEAD PROTECTIONS 36. The Texas Constitution generally forbids enforcing a lien through foreclosure on a Texas homestead. However, the provisions at Art. XVI Sec. 50 are
structured as eight exceptions to that prohibition. Home equity loans are the sixth exception, at Sec. 50(a)(6).2
37. Features of permissible home equity loans are set out at Sec. 50(a)(6)(A)-(Q). Among these are that:
• they are closed at a lender, title company, or attorney's office;
• they include an acknowledgment by borrower and lender as to fair market
value;
• they don't exceed an 80% loan-to-value ratio;
• they are without recourse -- i.e., the borrowers has no personal liability in the
event of default, unlike purchase-money mortgages, where a borrower can be pursued for a deficiency;
• a court order is required for foreclosure -- i.e., there are no non-judicial sales; • they must be repaid in equal installments that are fully amortized -- i.e.,
there's a schedule of payments that pays down principal and all presently-due interest with each payment;
• the penalty for noncompliance is forfeiture unless cure is effected.
38. A transaction that advances additional funds to the borrower by adding to the home equity loan's principal is a "refinance" by operation of Sections 50(e) and Section 50(f).
39. By operation of Section 50(f), "refinances" of existing home equity loans are subject to the all the requirements of Section 50(a)(6). One requirement of Section
2 Home equity lines of credit ("HELOC's") fall under the rubric of home equity loans generally, but they have their own requirements at Sec. 50(t).
50(a)(6) that is specific to refinances is that they may not occur more than once annually, a requirement set out at Sec. 50(a)(6)(M)(iii).
40. By operation of Section 50(L), a home equity loan's payments must be substantially equal and pay down the principal of the loan with every payment. Therefore, interest-only payment schedules are illegal.
C. PLAINTIFF'S HOME EQUITY LOAN MODIFICATION
41. Graze got a Texas home equity loan in 2003 for $300,000.00 from lender CTX Mortgage (or Centex Mortgage), predecessor of Nationstar. The homestead at issue is Plaintiff's residence at 6722 Orchid Lane, Dallas, Dallas County, TX 75230.
42. After 2003, Graze paid down principal to $272,095.00. 43. In 2010, Graze fell behind on payments.
44. On October 18, 2010, Centex as "Lender," and Graze, as "Borrower," entered into a written modification agreement that extended new credit to him by increasing his loan's principal balance by nearly $24,000, to $295,961.53. The sums advanced by this new extension of credit included past-due interest, past property taxes and insurance, future property taxes and insurance, and other charges. The new home equity principal began earning interest and purported to be collateralized by home equity.
45. In addition, and distinct from the new, noncompliant extension of credit, the modification converted the note to interest-only for two years, after which time the payment would jump by a factor of more than 4x.
46. There was no closing at the lender, title company, or an attorney's office for the modification, nor an acknowledgement by the parties as to fair market value.
47. Nationstar never provided to Graze as part of the modification the Section 50(g) constitutional disclosures relating to home equity loans.
48. The modification did not fulfill other formal requirements for the refinance of a Texas home equity loan as set out at Section 50(a)(6)(A)-(Q).
49. Nationstar did not apprise Plaintiff in any way of the operation of Art. XVI Section 50 of the Texas Constitution ("Section 50"), which sets out all the legal parameters for the making of a Texas home equity loan and the refinancing thereof. The modification agreements do not mention Section 50, and Nationstar did not otherwise mention Section 50 until recently. Nationstar stands in a position of specialized expertise relative to Plaintiff.
50. Sometime in 2010 or 2011, Nationstar learned that Section 50 forbids the rolling of arrears into home equity loan principal without a Section 50-compliant
refinance involving all the formalities of a Section 50 loan. Thus, Nationstar has known for some time that it has no lien in cases where it entered into modifications like
Plaintiff's.
51. Nationstar admitted to Graze that modifications that increase principal are illegal in Texas.
52. Nationstar has admitted to other borrowers that interest-only schedules violate Section 50.
53. Though it already knew of the violations asserted herein, Nationstar noticed default and an intent to foreclose against Graze in February, 2013.
54. Graze sent Nationstar notice according to Section 50(a)(6)(Q)(x) on February 19, 2013. Nationstar responded in the letters of February 26, 2013 and April 19, 2013, by acknowledging receipt of Graze's notice but failing to cure.
V. CAUSE OF ACTION: DECLARATORY JUDGMENT
55. Plaintiff re-alleges and incorporates by reference the allegations contained in the paragraphs above as if fully set forth herein.
56. Plaintiff brings this claim for declaratory judgment for himself and the class under Texas Civil Practice and Remedies Code Chapter 37.
57. Advancement by the lender of interest arrears, future interest, and sums representing property taxes and insurance under a home equity loan into new principal under a new loan is impermissible under the Texas Constitution short of renewed compliance with Section 50(a)(6), even if the new loan declares that it is not a loan or extension of credit under Section 50. It is the underlying reality of the advancement of additional sums to the borrower forming new principal, which concomitantly purports to collateralize additional borrower home equity, that determines whether there has been a Section 50 loan. Home equity loan principal is fixed as of the date the home equity loan was first made and can only decline thereafter with every payment made until that loan is paid off or refinanced through a new home equity loan. Home equity loan principal cannot increase after the closing unless there is a new Section 50(a)(6)-compliant loan event. If principal does increase, that is an extension of credit that must comply with all the requirements of Section 50(a)(6)(A)-(Q).
58. Plaintiff's modification advanced additional sums to the borrower but did not comply with one or more of the requirements of Section 50(a)(6)(A)-(Q), thereby rendering the lien invalid.
59. Section 50(a)(6)(L) requires that home equity loans be fully amortizing from inception, have substantially equal payments, and have no balloons. Interest-only schedules of payments that pay no principal violate Section 50(a)(6)(L). When they create balloons anywhere in the payment schedule of more than twice the average monthly payment that came before, they likewise violate Section 50(a)(6)(L).
60. Plaintiff seeks a declaration for himself and the class generally that: a. Increasing Texas home equity loan principal by advancing sums to
principal representing past-due interest, as well as past-due or future property taxes, or insurance is an extension of credit under Section 50. b. An extension of credit that does not satisfy any one of the requirements of
Section 50(a)(6)(A)-(Q) voids the underlying lien as of the date of the extension of credit.
c. Plaintiff's lien was voided as of the date of the modification that extended new credit.
d. A modification that contains interest-only or balloon terms violates Section 50(a)(6)(L).
e. Plaintiff's lien was voided as of the dates of the modification that contained interest-only or balloon terms.
f. Plaintiff's loan has been forfeited for Nationstar's failure to cure following notice from Plaintiff;
g. Class members' liens were voided as of their respective modification dates, or their first modification dates in cases of borrowers with serial illegal modifications.
h. Nationstar's prior knowledge of the asserted illegalities bars Nationstar's assertion that the equities favor Nationstar for purposes of the court imposing any equitable liens in cases where loan forfeiture occurs;
i. The modifications had no arbitration clause, and therefore any arbitration clauses in class members' original notes or security instruments as to the original home equity loans are inapplicable;
j. Nationstar is legally or equitably barred from requiring notice from individual borrowers of the Section 50 violations alleged in this case because it failed to provide its borrowers with the disclosures mandated by Section 50(g) that would have apprised borrowers of their various rights under Section 50.
k. Nationstar is legally barred from requiring notice from individual
borrowers of the Section 50 violations alleged in this case if it fails to cure within 60 days of:
i. the filing of this suit;
ii. the opt-out deadline following notice to the class; or
iii. a judgment in Plaintiff's favor on the issue whether increases to home equity loan principal are a Section 50 refinance;
iv. a judgment in Plaintiff's favor on the issues whether interest-only and balloon payments violate Section 50(a)(6)(L).
l. Nationstar's failure to cure in a timely manner under Section 50
mandates forfeiture of Plaintiff's and all class members' loans, including but not limited to disgorgement of loan payments made under the illegal modifications.
m. Section 50's cure provisions do not include rescission as an available cure option, particularly where rescission allows the lender to avoid the
consequences of its violations or otherwise makes the borrower worse off than the terms of the illegal modification or extension of credit.
VI. CLASS ACTION AVERMENTS
61. Plaintiff brings this class action on behalf of himself individually and all others similarly situated, pursuant to Rule 42 of the Texas Rules of Civil Procedure.
62. The proposed class consists of all Texas residents who entered into a transaction with Nationstar after 2007, styled as a "modification," that:
i. increased home equity loan principal and where any one of the following applies:
1. the "modification" was not closed at the office of the lender, an attorney at law, or a title company; or
2. the parties did not sign a written acknowledgment as to the fair market value of the homestead property on the date of the "modification"; or
3. Nationstar did not provide the borrower with the form disclosures of Tex. Const. art. XVI § 50(g) within 12 days prior to the "modification"; or
4. provided for interest-only payments or a balloon payment. ii. irrespective of whether principal increased, the modification
provided for interest-only payments or a payment more than twice the average monthly payment as stated in the modification.
a. Numerosity: the proposed class is so numerous that the joinder of all class members is impracticable. Although the exact number of class members is unknown to Plaintiff at this time, it is ascertainable by appropriate discovery. Plaintiff is informed and believes that the class includes thousands of class members. The identity and location of class members can only be identified from the records maintained and
possessed by Nationstar or its representatives.
b. Commonality: There are questions of law or fact common to the class. Such common questions include, but are not limited to:
Law:
• whether a transaction or agreement that increases the principal amount
of an existing Texas home equity loan is an "extension of credit" within the meaning of Tex. Const. art. XVI Section 50(a)(6) on the basis that there has been an "advance of additional funds" under Section 50(e);
• if increasing home equity loan principal is an extension of credit or
advance of additional funds, whether the agreements Nationstar made with class members complied with all the requirements for the making of a home equity loan under Section 50(a)(6);
• if the agreements Nationstar made did not include the disclosures
mandated by Section 50(g), is Nationstar legally or equitably barred from requiring notice as a precondition to forfeiture;
• whether Nationstar has 60 days from the filing of this suit to cure the
loans for the members of the class;
• whether, in the alternative, Nationstar has 60 days from the opt-out
deadline following initial notice to the class to cure class members' loans;
• whether, in the alternative to the above, Nationstar has 60 days from any
judgment invalidating the practice complained of herein (increasing home equity loan principal without Section 50 compliance) to cure class
members' loans;
• whether interest-only payments under a home equity loan modification
• whether a scheduled balloon payment of more than twice the average
monthly payment under a home equity loan modification violates Texas Constitution Art. XVI Sec. 50(a)(6)(L).
Fact:
• whether Nationstar entered into transactions or agreements with Texas
home equity borrowers whereby home equity loan principal was increased;
• whether Nationstar entered into transactions or agreements that imposed
interest-only payments or balloons;
• whether Nationstar used five or fewer standard forms for the vast
majority of such transactions or agreements;
• whether said transactions or agreements that increased home equity loan
principal fulfilled all the requirements of Section 50(a)(6).
c. Typicality: The claims or defenses of the representative parties are typical of the claims or defenses of the class. Plaintiff and all class
members have been injured by the same wrongful practices of Defendant. Plaintiff's claims arise from the same practices and conduct that give rise to the claims of all class members and are based on the same legal
theories.
d. Fair and adequate representation: The representative parties will fairly and adequately protect the interests of the class. In support of this proposition, Plaintiff shows:
i. the class representatives are members of the proposed class;
ii. the class representatives have expressed interest in representing the class;
iii. the class representatives are willing to pay the costs of notice and litigation;
iv. the class representatives have no interests adverse to other members of the class;
v. the class representatives have suffered the same harm as the class. e. Proposed counsel is adequate: Plaintiff has retained attorneys
experienced in consumer class actions and complex litigation as counsel. In particular, J. Patrick Sutton, Jeffrey W. Hurt, and David M. Gottfried have filed numerous cases and class actions involving the same precise claims as are being asserted here; are the only attorneys known to be prosecuting such claims; have already obtained an MDL order from the Texas Multidistrict Litigation Panel combining all such cases against Nationstar in Texas; have handled appeals of these same kinds of cases before the state and federal courts of appeals; and have brought the central issues to the Texas Supreme Court, where they are now set to be resolved. Attorneys Sutton, Hurt, and Gottfried have spent years
researching and litigating these sorts of cases and are likely the only counsel situated to bring this class action at this time. Attorneys Sutton, Hurt, and Gottfried have prior class action experience in multiple class actions pending or resolved. Attorney Sutton has brought and settled class actions against major lenders in mortgage cases in addition to originating a major national class action involving fire-prone computer power adapters that achieved approved class settlement. Attorneys Sutton, Hurt, and Gottfried can devote ample time to this case and
to the case. Attorneys Sutton, Hurt, and Gottfried have the database, file management, and office services sufficient for such a case, as proven in other similar pending cases.
f. Question of law and fact common to the class predominate. This case presents narrow, important, unresolved issues of law under the Texas Constitution: (1) whether principal of a Texas home equity loan can increase without renewed compliance with Section 50(a)(6)(A)-(Q), and (2) whether a modification can include interest-only payments. The first issue is expected to be resolved shortly in a case already pending in the Texas Supreme Court, and the answer will impact tens of thousands of Texas loans, including Nationstar's Texas loans. The same facts that led the Nationstar cases to be combined as an MDL show that facts common to the class are suitable for class resolution. The fact patterns and the issues of law are all but invariable among the class.
g. A class action is superior. A class action is superior to other available methods for the fair and efficient adjudication of this controversy for at least the following reasons:
i. Given the complex nature of Section 50 generally, the expense of litigating Section 50 claims, the lack of an attorney fee-shifting provision in Section 50, and the impaired finances of proposed class members, few, if any, proposed class members could afford to or would seek legal redress individually for the wrongs Defendant committed against them, and absent proposed class members have
no substantial interest in individually controlling the prosecution of individual actions;
ii. All the Nationstar cases are already combined as an MDL, which has a nexus with class certification and bolsters the need for class
treatment. It is important to concentrate all the Nationstar cases in one forum and possibly join, intervene, or consolidate all the MDL plaintiffs into one suit as representative plaintiffs.
iii. The Section 50 issues have already been certified by the U.S. Court of Appeals for the Fifth Circuit to be of "importance" and necessary for resolution by the Texas Supreme Court.
iv. Multiple pending class actions involve the same facts and issues but different lenders and loan servicers.
v. This action will promote an orderly and expeditious administration and adjudication of the proposed class claims, economies of time, effort and resources will be fostered and uniformity of decisions will be insured.
vi. Without a class action, proposed class members will continue to have invalidated liens but uncertainty as to the status of their loans, and nothing prevents Defendant from foreclosing on these class
members; thus, Defendant's violations of law will proceed without a check or remedy while Defendant continues to reap and retain the substantial proceeds of its wrongful conduct.
h. Management as a class action. Plaintiffs know of no difficulty that will be encountered in the management of this litigation which would preclude its maintenance as a class action.
i. Unique statute of limitations issues. In addition, individuals stand to lose important rights if this case is not maintained as a class action because a statute of limitations may apply in a unique way that bars claims relating to modifications occurring before 2009.
j. Relief generally applicable. Plaintiff seeks cure or forfeiture of the loans, and related equitable relief, on behalf of the proposed class on grounds generally applicable to the entire proposed class.
k. Substantial benefits to parties and the Court. The disposition of Plaintiff's and proposed class members' claims in a class action will provide substantial benefits to both the parties and the Court.
VII. PRAYER FOR RELIEF
WHEREFORE, Plaintiff, on behalf of himself and others similarly situated, prays for the following relief:
A. That this action be certified and maintained as a class action under Rule 42 of the Texas Rules of Civil Procedure and the proposed class certified as defined;
B. That the court appoint Plaintiff as representative of the Class; C. That the court appoint the attorneys and law firms representing Plaintiff as counsel for the Class;
59, which is incorporated in this prayer by reference;
E. That the court order Texas constitutional cure, penalties, forfeiture, and related relief and remedies;
F. That the court award Plaintiff and proposed class members the costs of this action, including reasonable attorneys' fees and expenses; and
G. That the court award such further legal and equitable relief as the court may deem just and proper.
DATED: September 22, 2013.
/s/ JPS
J. Patrick Sutton
Texas Bar No. 24058143 1706 W. 10th Street Austin, TX 78703 ph (512) 417-5903 f (512) 355-4155 Jeffrey W. Hurt, Esq. Texas Bar No. 10317055 Hurt & Berry, LLP
10670 N. Central Expressway Suite 450 Dallas, Texas 75231
Tel: (214) 382-5656 Fax: (214) 382-5657 David M. Gottfried Texas Bar No. 08231200
The Law Office of David M. Gottfried, PC 1505 W. 6th Street
Austin, TX 78703 Tel. (512) 494-1481 Fax (512) 472-4013 Attorneys for Plaintiff
CERTIFICATE OF SERVICE
I certify that on September 22, 2013 a true and correct copy of the foregoing notice was served on:
via electronic means: Daron Janis
Locke Lord LLP
2200 Ross Avenue Suite 2200 Dallas TX 75201
J. Patrick Sutton
