I found out that these fuzzy galls are caused by a Gall Wasp. I see these galls on a lot of oak tree leaves while hiking in the Ouachita National Forest. I did some research and discovered that a small wasp implants an egg into the growing leaf which then turns into a larva which then entices the oak tree to grow these galls which the larva then inhabit and use for protection while they mature into adults. (Natural Historian)
Gall Wasp Facts
There are more than 1250 species of gall wasps worldwide and about 600 species in the United States and Canada. Most species attack oak trees.
Salivary secretions from the wasp larva stimulate the plant to produce the gall, so the insect actually modifies the plant’s normal response to injury, resulting in food and shelter for the larva. Many leaf galls are red and white and resemble miniature stars, sea urchins, cones, cups, or saucers. (everythingabout.com)
One can find galls on nearly all parts of such trees, some on the leaves, the buds, the branches, and the roots. Other species of gall wasps live in eucalyptus trees, rose bushes or maple trees, as well as many herbs. Frequently, the determination of the species is much easier through observation of the galls produced rather than the insect itself. (Wikipedia)