FILED

14-0326
8/11/2014 12:59:46 PM
tex-2113163
SUPREME COURT OF TEXAS
BLAKE A. HAWTHORNE, CLERK

NO. 14-0326
_____________________________________________________

IN THE

SUPREME COURT OF TEXAS

_____________________________________________________

WELLS FARGO BANK, N.A., AS TRUSTEE FOR OPTION ONE MORTGAGE LOAN
TRUST 2006-1 ASSET-BACKED CERTIFICATES, SERIES 2006-1

Petitioner

v.

LONZIE LEATH

Respondent.
_____________________________________________________

From the Court of Appeals for the Fifth Judicial District of Texas
No. 05-11-01425-CV

RESPONSE TO PETITION FOR REVIEW

_____________________________________________________

LAW OFFICE OF WENDEL A. WITHROW

Wendel A. Withrow
Bar No.: 21830800
1120 Metrocrest, Suite 200
Carrollton, Texas 75006
Phone: 972-416-2500
Fax: 972-417-0685
E-Mail: wendel@withrowlaw.com
ATTORNEY FOR RESPONDENT
 TABLE OF CONTENTS
Page

TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (i)

INDEX OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (ii)

RESPONSE TO UNTITLED PAGE vii . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

RESPONSE TO STATEMENT OF THE ISSUES . . . . . . . . . . . . . . . . . . . . . . . . . 3

RESPONSE TO STATEMENT OF THE FACTS . . . . . . . . . . . . . . . . . . . . . . . . . 4

RESPONSE TO SUMMARY OF THE ARGUMENT . . . . . . . . . . . . . . . . . . . . . 5

RESPONSE TO ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

A. The Court of Appeals’ Waiver Decision Conflicts with

This Court’s Precedent and that of the Texarkana Court of Appeals 8

B. Awarding Respondent a Free House is Contrary to Section 50(h) . 10

C. The Court of Appeals Undermined the Lender’s Right to Notice and an

Opportunity to Cure Before Forfeiture is Imposed . . . . . . . . . . . . . 13

PRAYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

CERTIFICATE OF SERVICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

i
 INDEX OF AUTHORITIES

CASES Page

Crump v. Frenk, 404 S.W.3d 146

(Tex. App. - Texarkana 2013, no pet.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

Curry v. Bank of America 232 S.W.3d 345, 353

(Tex.App.Dallas 2007 pet. denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 15

Texas Commission on Human Rights v. Morrison,

381 S.W.3d 533, 536 (Tex. 2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . 9

Thota v. Young, 366 S.W. 3d 678 (Tex. 2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Young, 373 S.W.3d at 784 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

STATUTES

TEX.R.CIV.P. 166a(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

7 Tex. Admin. Code §153.91(a)(3)(2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Texas Constitution Section 50(a)(6)(Q)(X) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 12

Texas Constitution Section 50(a)(Q)(X)(b) . . . . . . . . . . . . . . . . . . . . . . . . . . .16, 17

ii
 RESPONSE TO UNTITLED PAGE vii
TO THE HONORABLE SUPREME COURT OF TEXAS

Petitioner has presented a number of “introductory” remarks to the Supreme

Court which must be addressed:

1. The Court of Appeals did not ignore any provisions of the Texas

Constitution’s home equity provisions. The Court of Appeals addressed all legal

issues and factual findings properly presented to the Trial Court and then raised on

appeal to the Court of Appeals. As will be detailed herein, key “facts” alleged by

Petitioner were not, and are not “facts” presented at the Trial Court level and must be

disregarded.

2. The failure of the Petitioner to timely raise the defense of Section 50(h)

was directly addressed by Judge Brown in her Supplemental Opinion on Rehearing.

In addition to the waiver issue, Judge Brown specifically questions Wells Fargo’s

statement: “the facts are undisputed that the requirements for protection under Section

50(h) were satisfied at closing.”

Respondent will show that Petitioner’s allegations are not correct statements

of the facts in this case, but that the trial testimony showed the original lender, H&R

Block Home Mortgage, had actual notice that this property and its appraisal had

problems, but chose to go forward anyway.

1
 3. In response to the Notice requirement under Section 50(a)(6)(Q)(X), this

issue was never presented by Trial Counsel or Appellate Counsel, Robert Negrin, for

a very good reason: The issue of notice was conclusively established against Wells

Fargo nearly 3½ years before the jury trial even started. Trial Counsel for Wells

Fargo never plead the issue of notice, never presented contradictory evidence on

‘notice’ because there was no such contradictory evidence. Trial counsel never

asked for a jury question or jury instruction on “notice” because the issue was never

raised or disputed. Appellate Counsel Negrin never raised the issue because it had

not been raised at trial and was not contested on appeal, until the Motion for

Rehearing by new Appellate counsel.

4. The required notice was satisfied on numerous occasions by undisputed

facts and therefore could not be “gutted” by the Court of Appeals. Justice

Fitzgerald’s dissent is apparently based on an acceptance of Wells Fargo’s

unsupported statement that no proper notice was given. See Curry v. Bank of Am.

N.A. 232 S.W.3d 345, 353 (Tex. App. - Dallas 2007, pet. denied). As will be pointed

out hereinafter, the appraisal value problems started prior to the loan even closing and

both the original mortgage company and Wells Fargo were given multiple notices of

an appraisal problem and chose to do nothing, either before, during or after the 60 day

cure period.

2
 RESPONSE TO STATEMENT OF THE ISSUES

1. As stated, Issue #1 by Petitioner is incomplete. In addition to Lender’s

failure to “cite to Section 50(h) in the district court or before rehearing in the Court

of Appeals,” it should also include that lender failed to raise the issue in any

discovery response, any trial pleading, any testimony, any document, any jury

instruction, any jury question, or any post-trial motion.

2. Issue #2 contains two incorrect factual premises which should be

corrected as follows:

(c) The independent appraiser’s report contained an error which was

confirmed in sworn testimony by the lender chosen appraiser himself at

trial and was then confirmed by the jury’s answer to the valuation

question.

(d) There was evidence from the beginning that the original lender had

actual notice of an appraisal problem.

3. Issue #3 labels the borrower’s allegation as “generic” which is

incorrect. The written notice by Mr. Leath’s attorney was given nearly 3½ years

prior to trial. (See Appendix Exhibit One) It was specific and cited the exact

constitutional violation. Further, there were multiple other notices which were

3
ignored by the lender and at no time did H&R Block, Option One, or Wells Fargo

comply or attempt to comply with the cure available under the Texas Constitution.

RESPONSE TO STATEMENT OF FACTS

Respondent would point out the following corrections and additional facts for

the Court to consider:

1. All parties did not agree the valuation of the property was $425,000.00

in its present condition.

2. Prior to the Crum Appraisal, the lender had a lower appraisal for

$414,500.00, but “they were not satisfied with that, and directed us to Mr. Crum” RR

Vol. 4 pg 10 and page 18.

3. Mr. Leath and H&R Block had multiple discussions over the value of the

property and that it was a correct value “contingent upon the repairs begin done” RR

Vol. 4 pages 11-15, pages 21-22.

4. H&R Block went so far as to promise to make the repairs if the

contractor did not do so. RR Vol 4, pages 14-17 and Plaintiff’s Exhibit 5.

5. The H&R Block loan was initially serviced by Option One and then

taken over by Wells Fargo. Mr. Leath complained about the repairs not being done

and that the value was not what they were alleging it to be. RR Vol 4 pages 33-35.

4
 6. Mr. Crum’s sworn testimony confirms the appraisal was incorrect and

Mr. Crum’s failure to check the box that the appraisal was subject to repairs is an

error of Mr. Crum who was selected, hired, and paid by the lender.

RESPONSE TO SUMMARY OF THE ARGUMENT

1. Section 50(h)'s Safe Harbor Protection is critically important because it

provides security to lenders and borrowers that when a mistake is made, there is a

process to “cure” that mistake. While Petitioner talks about “traps” and “gotchas,”

there is no evidence that Mr. Leath entered into this transaction with any such ideas.

There is evidence that after being given multiple notices, H&R Block and Wells

Fargo took no steps to comply with the law or even acknowledge a problem existed.

2. The discussion of “subsequent assignees need assurance” would be far

more effective if Petitioners would have followed the law and done something to

“cure” the mistake after explicit and exact notice. If they are really concerned about

those “assignees” who buy their loan paper, they would take at least a few steps

towards resolving the problem, rather than ignoring it. If anything undermines “that

assurance,” it is not the Court of Appeals opinion, but the mishandling of this home

equity loan and not following the strict requirements which the lender must adhere

to.

5
 3. The Petitioner argues that a sufficiency of the evidence argument

somehow allows the Court to now consider Section 50(h). While this ignores the

well recognized Appellate rules of not raising issues in a timely manner, it should be

rejected for the following additional reasons:

A. The sufficiency of the evidence arguments on appeal never

discussed whether there was sufficient evidence of the notice of a

constitutional violation. The only argument was whether the jury had

sufficient evidence of the value they found for the property.

As pointed out and accepted by the Court of Appeals and acknowledged by

current counsel for Wells Fargo in this Petition, the jury accepted the testimony of the

lender’s expert appraiser in answering the jury question on value. The evidence was

sufficient and Wells Fargo submitted no contrary evidence to the jury answer.

In reviewing the cases cited by Petitioner in this Summary, it is clear that these

do not support reversing the opinion of Judge Brown as follows:

4. Petitioner’s conclusion that allowing a Judge and Jury to review

the transaction somehow imposes a “new risk” on lenders or their assignees is not

well founded. First, it is a statement not supported by any testimony or other

evidence. Second, the Petitioner and their “assignees” would obviously favor a

system of non-review which prohibits the challenge of errors.

6
 The Texas Constitution provides a mechanism for notice and then 60 days to

cure. The Petitioner did not follow that mechanism. The only revisionist history

going on is the Petitioner trying to distract the Court from the errors made by H&R

Block, Petitioner and the appraiser they hired and used as an expert at the trial.

The next paragraph in Petitioner’s extended ‘summary’ of the argument

contains the following inaccurate statements which must be responded to:

A. The Court of Appeals did not adopt a standard contrary to the

constitutional mandate. The adequacy of the notice was never contested by the

lender for the simple reason that the multiple notices were clear, concise and certainly

adequate to trigger the ‘cure’ provision of the Constitution. If the provider was truly

interested in ‘curing’ the mistake, it has provided no evidence that during the 3½

years, it ever asked for more details or conducted any investigation after receiving the

notices.

B. As noted above, Justice Fitzgerald’s dissent was apparently based on an

unsupported and inaccurate statement by the Petitioner that the Notice was

insufficient. If the Notice was a disputed issue, the Petitioner could have plead it and

tried to prove it to the same Judge and jury. It did not do so.

7
 Whether the issue is waived or not, the undisputed facts were that the multiple

notices were clear and definitive. Certainly sufficient to start the 60 day ‘cure’

period.

RESPONSE TO ARGUMENT

A. THE COURT OF APPEALS’ WAIVER DECISION CONFLICTS WITH

THIS COURT’S PRECEDENT AND THAT OF THE TEXARKANA COURT
OF APPEALS (RESTATED)

Respondent would show there is no conflict with any of the cases cited by

Petitioner as follows:

1. As detailed below, the cases cited by Petitioner are not even close to

being ‘on point.’

2. Thota and Morrison both discuss broad form submission of jury

questions which have no relevance to whether an Appellate Court can use its

“common sense application of our procedural rules” to expand an insufficient

evidence argument about the jury’s valuation answer to whether the requirements of

Section 50(h) were satisfied or not. They are not the same issue, by even the most

liberal view of “common sense.”

3. Specifically, in Thota v. Young, 366 S.W. 3d 678 (Tex. 2012), the

Supreme Court did not mention any such analysis of ‘form over substance’ that would

allow the new issue to be considered.

8
 In Crump v. Frenk, 404 S.W.3d 146 (Tex. App. - Texarkana 2013, no pet.), the

Texarkana Court actually held the opposite of what Petitioner has cited this case for.

By clear and concise language the Court concluded in paragraph [12] that because

Crump raises this argument for the first time on appeal, she has waived any error.

See Young, 373 S.W.3d at 784; see also TEX.R.CIV.P. 166a(c).

In Texas Commission on Human Rights v. Morrison, 381 S.W.3d 533, 536

(Tex. 2012) the Supreme Court did rule that to preserve a “Casteel” complaint on

appeal, the objection to a broad form jury question did not have to mention the case

name “Casteel.” However, the Court clearly kept the requirement that the Trial

Court had to be “sufficiently put on notice” and be aware of a specific objection. In

Petitioner’s brief, Wells Fargo has pointed to no testimony, statement by counsel, or

document which would have made the Trial Court or even the Appellate Court aware

of Petitioner’s Section 50(h) complaint, until the Motion for Rehearing.

4. This Court should not grant review because the Petitioner never made

the “correct argument or objection” regarding Section 50(h) either in substance, form

or otherwise. There was never a dispute over notice and Trial Counsel Negrin

correctly moved on to the only disputed fact issue which was valuation.

5. Any attempt to raise Section 50(h) at the Appellate level has been

waived.

9
B. AWARDING RESPONDENT A FREE HOUSE IS CONTRARY TO
SECTION 50(H) RESTATED

By the above title and Argument which follows, Petitioner is attempting to

combine two different sections of the Texas Constitution which serve two very

different purposes in how Home Equity Loans are viewed and administered.

Section 50(h) allows a lender to rely on an appraisal if two requirements are

met:

1) The appraisal has to be prepared in accordance with State or

Federal law. One such requirement is accuracy.

2) The lender does not have actual knowledge that the fair market

value was incorrect.

On the first requirement:

A. The Petitioner’s own Statement of Facts states the Appraiser did not

check the correct box regarding repairs.

B. The Petitioner’s own Statement of Facts admits that Mr. Crum had made

a mistake on the appraisal amount by not subtracting out the repairs.

C. Mr. Crum was selected, hired and paid by the Lender H&R Block which

sold the loan to Petitioner.

10
 D. As a matter of law, the mistakes of Mr. Crum are imputed to H&R Block

and the Petitioner.

E. As a matter of law, the first requirement of Section 50(h) had not been

met by Petitioner and Trial Counsel Negrin never made any attempt to plead or prove

otherwise.

On the second requirement of Section 50(h), the following evidence was

presented at trial.

A. Prior to the Crum Appraisal, the lender had a lower appraisal for

$414,500.00, but “they were not satisfied with that, and directed

us to Mr. Crum” RR Vol. 4 pg 10 and page 18.

B. Mr. Leath and H&R Block had multiple discussions over the

value of the property and that it was a correct value “contingent

upon the repairs begin done” RR Vol. 4 pages 11-15, pages 21-

22.

C. H&R Block went so far as to promise to make the repairs if the

contractor did not do so. RR Vol 4, pages 14-17 and Plaintiff’s

Trial Exhibit 5.

D. The H&R Block loan was initially serviced by Option One and

then taken over by Wells Fargo. Mr. Leath complained about the

11
 repairs not being done and that the value was not what they were

alleging it to be. RR Vol 4 pages 33-35.

E. The above testimony was not contradicted by Petitioner.

F. As a matter of law, the second requirement regarding actual

knowledge of the lender has not been met and based on the

evidence, the Lender did have actual knowledge.

G. Trial Counsel Negrin did not plead or attempt to prove otherwise.

As a consequence of the above, Petitioner has not plead, proved or otherwise

shown the Court any evidence that it is entitled to the benefits of Section 50(h).

As to Petitioner’s statement about a “free house,” the Texas Constitution states

that”... 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....” Texas

Constitution Section 50(a)(6)(Q)(X).

If Petitioner wanted to avoid this clause, Petitioner could have reviewed the

loan more carefully, consulted H&R Block or the appraiser about the repair issue, and

most importantly, taken advantage of the cure provision as provided in sub-paragraph

(b) of that same sub-section after receiving the first notice letter on or about January

25, 2008.

12
 Petitioner did not take advantage of the cure provision and has not done so to

this date.

C. THE COURT OF APPEALS UNDERMINED THE LENDER’S RIGHT TO

NOTICE AND AN OPPORTUNITY TO CURE BEFORE FORFEITURE IS
IMPOSED (RESTATED)

In Petitioner’s third issue, it claims the Court of Appeals has adopted an

erroneous notice standard to trigger the opportunity cure. In response:

1) The Court of Appeals was not presented with this precise issue because

it was not plead or tried at the Trial Court level.

2) The evidence of proper notice was never disputed by trial counsel

because of the evidence of multiple proper notices as follows:

A. Prior to the Crum Appraisal, the lender had a lower appraisal for

$414,500.00, but “they were not satisfied with that, and directed us to

Mr. Crum” RR Vol. 4 pg 10 and page 18.

B. Mr. Leath and H&R Block had multiple discussions over the value of

the Property and that it was a correct value “contingent upon the repairs

begin done” RR Vol. 4 pages 11-15, pages 21-22.

C. H&R Block went so far as to promise to make the repairs if the

contractor did not do so. RR Vol. 4, pages 14-17 and Plaintiff’s Exhibit

5.

13
D. The H&R Block loan was initially serviced by Option One and then

taken over by Wells Fargo. Mr. Leath complained about the repairs not

being done and that the value was not what they were alleging it to be.

RR Vol 4 pages 33-35.

E. Mr. Leath’s attorney at the time, Neil A. Mabry sent a detailed letter to

Mr. Negrin’s law firm on January 25, 2008 citing the exact provision of

the Texas Constitution which the lender had violated. (See attached

Exhibit 1).

NOTE: It is undisputed Wells Fargo never attempted to “cure” this

violation of the Texas Constitution.

F. After Wells Fargo filed its TRCP 736 action for an expedited

foreclosure on March 7, 2008, Mr. Leath filed his Answer on April 7,

2008 stating that the home equity loan had violated the Texas

Constitution by exceeding eighty percent of the actual fair market value.

[RR Vol. 8 Defendant’s Trial Exhibit 51] NOTE: It is undisputed that

Wells Fargo never attempted to “cure” this violation of the Texas

Constitution.

G. Mr. Leath’s live pleading for the Trial which is the subject of this appeal

is Plaintiff’s Original Petition filed July 1, 2008. In paragraph III of this

14
 Plaintiff’s Original Petition, Mr. Leath again gives written notice to

Wells Fargo that the home equity loan violates the Texas Constitution

[Appellee’s Exhibit 2] NOTE: It is undisputed that Wells Fargo never

attempted to cure this violation.

H. Even after the Final Judgment of July 8, 2011 and the jury verdict May

9, 2011, Wells Fargo has never attempted to “cure” this violation.

Based on the above, Petitioner’s entire factual premise of a “generic” notice is

not supported by any evidence.

Petitioner’s next argument discusses whether the Texas Administrative Code

guidelines were satisfied as to the necessary notice to trigger the 60 day “cure”

period. As reflected in 7 Tex. Admin. Code §153.91(a)(3)(2004) and discussed in

Curry v. Bank of America 232 S.W.3d 345, 354 (Tex.App.Dallas 2007 pet. denied),

the Court specifically does address this issue by stating:

“We note it provides that notice is adequate under the cure provision if it

‘include(s) a reasonable description of the alleged failure to comply’.”

Based on the multiple notices given in this matter noted in A-H above, the

notice given is certainly “adequate.” At the latest, the attorney letter of January 25,

2008 directly to the law firm of Mr. Negrin starts the 60 day period which has long

expired without any attempt at “cure”.

15
 In response to the hypothetical posed by Petitioner:

1. The hypothetical is incomplete and does not represent the facts in this

case.

2. The Supreme Court should not grant a Petition for Writ of Error based

on a hypothetical set of facts.

3. Even if the hypothetical facts were close to complete and correct,

Petitioner would have to follow the cure provision of the Texas Constitution in

50(a)(Q)(x)(b) as follows:

(b) sending the owner a written acknowledgment 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;

Since Petitioner never took advantage of this “cure” provision, there are no

facts to determine whether the Petitioner acted within the Law in how they responded

to the Notice. Petitioner did not respond at all. The 60 days expired.

In response to Petitioner’s argument about the size of the violation, Petitioner

made the decision to purchase this loan which took the 80% loan to fair market value

limit right to the edge. Petitioner made the decision to purchase this loan without

checking the file to see that there was a question about the repairs or the appraisal and

further, that H&R Block had received an even lower appraisal than the $425,000.00.

16
Petitioner made the decision to purchase a home equity loan with full knowledge the

80% rule was in the Texas Constitution and that the penalty was forfeiture.

Petitioner’s complaint should be with H&R Block or its own internal procedures for

Purchasing loans in a ‘bundle.’ The Court of Appeals followed the law based on the

facts before it.

The final argument of Petitioner is asking for a different standard of when the

60 day right to cure should begin. However, this proposed standard does not match

the Texas Constitution mandate for “written acknowledgment” in Section

50(a)(Q)(x)(b). It does not match the regulations set out in Tex.Admin.Code

§153.91.

PRAYER

Respondent would pray that the Petition for Review be denied.

/s/
Wendel A. Withrow,
Attorney for Respondent

Certificate of Counsel

I, Wendel A. Withrow, hereby certify that the body of the brief contains the
following: 17,714 characters; 3,611 words, 256 sentences; 369 lines, and 125
paragraphs.
/s/
Wendel A. Withrow

17
 CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the foregoing Waiver of
Response to Petition for Review was sent on August 11, 2014 pursuant to Texas
Supreme Court Rules:

Robert T. Mowrey B. David L. Foster

Texas Bar No. 14607500 Texas Bar No. 24031555
rmowrey@lockelord.com dfoster@lockelord.com
W. Scott Hastings LOCKE LORD LLP
Texas Bar No. 24002241 600 Congress Avenue, Ste. 2200
shastings@lockelord.com Austin, Texas 78701
Daron L. Janis (512)305-4700
Texas Bar No. 24060015 (512)305-4800 (FAX)
djanis@lockelord.com
Locke Lord LLP
2200 Ross Avenue, Suite 2200
Dallas, Texas 75201
(214) 740-8000
(214) 740-8800 (fax)

Robert N. Negrin
Texas Bar No. 14865550
rob.negrin@tx.cslegal.com
Codilis & Stawiarski, P. C.
650 N. Sam Houston Parkway East, Ste. 450
Houston, TX 77060
(281) 925-5200
(281) 925-5300 (fax)

/s/
WENDEL A. WITHROW

18
 APPENDIX
EXHIBIT ONE

LAW OFFICES
Ross & .MATTHEws, P.C.
3650 Lovell Avenue
fort Worth, Texas 76107
Phone (817) 255-2044 fax (8 I7} 25.5-2090

Please reference. our File Numbtr 1329334 whtn replying Neil A: Mabry
Of Counsel

January 25, 2008

Codilis & Stawiaiski VIA FACSIMILE to 281·925-5300

650 N. Sam Houston Pkwy, # 450 AND REGULAR MAIL
Houston, Texas 75060

Re: Account Number: OOJ9488717CNS44-08-0158

Borrower: Lonzie Leath
Property: 936 Hickory Knob Circle, .Cedar HOI, Texas 75104

Dear Sir or Madam:

This Jetter is written on behalfofLonzie Leath with regard to the above referenced mortgage.
.• Initially, Mr. Leath received a notice that you intended to proceed tojudicial foreclosw-e of this Joan
unless an agreement was reached between Option One Mortgage and Mr. Leath in regard to
utilization of one of several Joss mitigation options. Mr. Leath responded immediately seeking to
effectuate a modification of the loan agreement which would place any alleged ~rrearagc at the end
ofthe amortization schedule and reswne making his normal monthly payments. In this regard, Mr.
Leath promptly completed and returned all submitted paperwork respecting his application to enter
such an·agreement.

In that there was no prompt response from Option One or your office concerning the status
of this agreement, Mr. Leath contaCted this firm regarding what would be his potential.oplions with
respect to preventing the foreelosure. l reviewed the paperwork that had been supplied to me by Mr.
Leath and it appears to me that there maybe a serious problem with t11c valid icy ofyour lien in regard
to this property. According to the settlement statement provided to me by Mr. Leath, a disbursement
of cash occurred to the borrower which would render this a Home Equity loan. As rarn sure you arc
aware~ under Article 16, Sec. 50 (a)(S)(B) the aggregate of all home equity financing against a
homestead may n~t exceed 80% of the fair market value of such homestead.

There were two appraisals which were performed on this house and which were given
consideration by the le,pder. Both are provided as attachments to this correspondence. The nrst
apprrusal was performed on AprH 181 2003 and indicated that the house would have a fair market
value equal to $350,000.00 but was madeexpr~ssly contingent upon completion of the construction
project which was under way at the time. The second appraisal was performed on September I 5,
2004 and was used. by the lender in their final underwriting process. That appraisal report indicates
that the determination of value was made as a result of a "recently completed...total renovation and
mold remediation project. 1' The condition of a property was described as being '1like neW. 11

Offices in Ausdn, Houston and San Antonio by appointmen(.

 Codilis & Stawiarski
January 25, 2008
Page-2-

However, the condition of the property was anything but like new and the repairs had not
been effectively completed. On September 9, Mr. Leath had faxed a copy of an estimate from J.
Beebe Construction Service and General Contractor Inc. to Larry Englart at Option 011e/H &.R
Block showing that over $110,000.00 in repairs were necessaty to the property due to improperly
installed flooring and damage caused by the errors and omissions ofthe roofing contractor. This fax
was followed by a second fax qn September 17, 2004 wherein Mr. Leath again identified the two
appraisals stating the fair market value to be $350,000.00 and the contingency of same on the
effective completion of the reconstruction project. Apparently believing that these problems could
be resolved, Option One chose to proceed with the loan closing on October 23, 2004. The
Se11lement Statement indicates that its total amount of the loan provided by. Option One was
$280,000:00; The condition ·of the property clearly did no( warrant the appraised value being
$350,000.00 and youwillnote·byrev1ewoftherecords ofthe Dallas CountyAppraisal District that,
because of this condition, the 2006 and 2007 values have sigruficantly declined from a high of.
$333,890.00 to its current market value of$232,880.00. Obviously, this presents serious issues with
respect to the validity·ofyour lien under Article 16, Sec.50..

As you may also ·be aware, Article i6, Sec. 50 offers you opportunities to address this
situation and Mr. Leath may be amenable to your reasonable considerations which wiU prevent the
foreclosure. I have advised Mr. Leath that due to the seriousness of this issue, he should
immediately initiate Htigation in the event you attempt to proceed with a foreclosure without
addressing these issues. .I would appreciate y01.1 providing to myself, in writing, a .state.ll)ent of
Option One's position with respect to these matters. Thank you for your prompt attention to this
matter. ·

Sincerely,

-1W~h~ ~.
NeiJA.~~p
Of Counsel
NAM/baj
Enclosure(s)
cc: Lonzie Leath
File No.: 1329334