Reported / Citable
Background
Laura Schmidt borrowed $168,750 from Velocity Commercial Capital in July 2021, securing the loan with a deed of trust on property at 102 Ridge Road in Manvel, Texas. U.S. Bank holds the loan and deed of trust, and PHH Mortgage Corporation services the loan.
After Schmidt sued in state court to stop a foreclosure sale, the case was removed to federal court. She sought quiet title and a declaration that the commercial-loan lien was void because Ridge Road was her homestead. She moved to declare the lien invalid and unenforceable, a request the magistrate judge construed as seeking summary judgment.
The Court’s Holding
Magistrate Judge Andrew M. Edison recommended denying Schmidt’s motion. Under Texas law, a commercial loan cannot be secured by a lien on homestead property, but a lien validly created before property becomes a homestead is not defeated by the borrower’s later designation of the property as a homestead.
The record presented a genuine factual dispute over whether Ridge Road was Schmidt’s homestead when the loan originated on July 28, 2021. Schmidt alleged in her pleadings that it had been her homestead since March 17, 2021, but she supplied no competent summary-judgment evidence supporting that assertion. Meanwhile, documents she signed under oath at closing identified a different property as her homestead and disclaimed any present or intended homestead interest in Ridge Road. A reasonable jury could find that Ridge Road was not her homestead when the lien attached.
Key Takeaways
- A commercial-loan lien on a Texas homestead is generally void, but timing is decisive.
- A later homestead designation cannot invalidate a lien that attached before the property became a homestead.
- Unsworn allegations in pleadings are not competent evidence for summary judgment.
Why It Matters
The recommendation underscores that Texas homestead protections turn on the property’s status when the lien was created. Borrowers challenging a lien must support their claimed homestead status with competent evidence, particularly where closing documents point the other way.
The recommendation does not decide when Ridge Road became Schmidt’s homestead; that factual issue remains for later resolution in the case.