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Texas Supreme Court upholds violation cure for home equity loans

The most significant reason banks don't engage in home equity lending in Texas is the severe penalty for mistakes. Forfeiture of principal and interest is harsh - and should the problem exist throughout a home equity loan portfolio, the result could make a sizeable dent in the bottom line. The Texas Supreme Court has recently delivered some very good news about curing mistakes in home equity loans.

On June 7, 2001, the Texas Supreme Court issued its opinion in Doody v. Ameriquest, holding that when a home equity lender cures a violation of the 3 percent fee cap by refunding the overcharge, the lender retains a valid lien against the homestead property.

To recap the history of this case, ...

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