Texas Supreme Court Bunts on FMV Issue in Home Equity Loans

The Court denied a petition for review in Carrington Mortgage Services LLC et al v. Hutto from the Houston Court of Appeals. The issue of concern to lenders involved the lower court’s determination that failure of the lender to sign the acknowledgement of fair market value at the time of closing violated one of the requirements for a valid lien.

All of the financial services trade associations had supported the review, arguing that the language “at the time of closing” referred to the value—not the timing of the signatures.

Since this requirement affects lien validity, it is important that lenders assure that they have an officer/closer sign the acknowledgement at closing. Furthermore, if this issue is raised by borrowers, the lender should use the cure provisions of the Constitution to avoid the invalidation of the lien. This means paying $1000 to the borrowers and offering to refinance on the same terms.

Karen Neeley

Kennedy Sutherland, LLP

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