Over five years, Texas Supreme Court Justice David Medina took out three high-interest, adjustable rate home equity loans amounting to nearly the full value of his home, which later burned in an arson fire.
A Houston Chronicle review of the investigation leading to grand jury indictments against Medina and his wife show the details of the family’s serious financial problems before the home in northern Houston suburb of Spring burned last summer.
The Harris County District Attorney’s Office dismissed the indictments — one count of evidence tampering against the justice and one count of arson against his wife Francisca — citing a lack of evidence. But prosecutor Vic Wisner said the Medinas were still under investigation.
The Harris County Fire Marshal’s Office said it became suspicious of the house fire after discovering a mortgage company sued in June 2006 to foreclose on the home and they discovered an accelerant in the rubble. Investigators ruled it was intentionally set.
Medina denied he or his family had any involvement in the fire.
Medina bought the 5,100-square-foot home in 1992 shortly after it was built, according to county property records. The records did not list the purchase price, but the Harris County Appraisal District’s first appraisal of the home, in 1993, was $173,900. District officials said that would have been close to the purchase price.
The Chronicle’s review of court records in the case found that Medina first obtained a cash-out refinance loan in September 1998.
The loan was for $204,750, almost $4,000 more than the official appraised market value. But because state law limits home equity loans to 80 percent of the home’s fair market value, a private appraisal of at least $250,000 would have been required for the loan to be proper.
In December 2001, Medina obtained a second refinance loan for $232,000. The official market appraisal on the property for that year was $247,200. The fair market value would have needed to reach $290,000 for the loan to meet legal requirements.
In November 2003, when the final refinance loan was made, the official market value of the home was $308,500 and the loan was for $288,000.
Following state law, the appraisal used for loan purposes would have been at least $360,000, the newspaper reported. Under that value, the house would have more than doubled in value in 11 years.
Jim Robinson, chief appraiser for the county appraisal district, said the value of Medina’s home increased in 2003 because of the addition of a swimming pool, recognition of living space above the detached garage and a bump up in overall grade.
Other homes on the same street didn’t increase in value as quickly as Medina’s, the Chronicle reported. While Medina’s home value grew by 77 percent in its 15 years, two homes across the street that were originally appraised at about the same price as Medina’s went up 31 percent and 14 percent, respectively.
Robinson said Medina’s home was being compared to similar homes in the general vicinity and not its neighbors.
“The subject property is in a different valuation neighborhood than the two adjacent properties,” Robinson said. “There are many reasons that a neighborhood may have separate sub-markets contained within its boundaries.”
Medina’s final loan called for monthly payments of $2,525, with upward adjustments starting in December 2005.
WM Specialty Mortgage, the company that serviced the loan, didn’t recieve a payment after February 2006, according to the foreclosure lawsuit it filed in July of that year.
Medina blamed missed payments on a “miscommunication” with his bank. He brought the home out of foreclosure in December 2006.
The Medinas’ attorney, Terry Yates, has acknowledged the family had financial problems. They owed nearly $1,900 in fees to a homeowners association and let the insurance policy on the house lapse, meaning losses from the fire were not covered.
Medina was appointed by the governor to the state’s highest civil court in 2004 and elected to a full term two years later.
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