On May 29, 2026, the Texas Supreme Court in Staub v. BBVA USA held that the forfeiture remedy in Texas Constitution article XVI, section 50(a)(6)(Q)(x) applies exclusively to breaches of constitutional obligations incorporated into home equity loans and is not available for breaches of ordinary contract terms. No. 24-1057, 2026 WL 1500941, at *8 (Tex. May 29, 2026).
In 2018, a borrower obtained a home equity line of credit with a promotional interest rate secured by his homestead. The loan agreement provided that the lender would forfeit principal and interest should it “fail to comply with [its] obligations under the extension of credit and fail to correct the failure to comply not later than the 60th day after the date [the borrower] notifies [the lender] of [its] failure to comply,” “but only to the extent required by Section 50(a)(6), Article XVI, Texas Constitution.”
Two years later, the borrower and his non-obligor wife discovered the lender overcharged approximately $10,000 in interest and requested that the lender correct its error. After the lender refused, the borrower sued the lender for breach of contract and declaratory judgment, seeking actual damages or, alternatively, forfeiture of principal and interest, and a declaration that the lender forfeited principal and interest due to its breach of the loan’s promotional interest rate provision. The parties stipulated that the borrower prevailed on the breach of contract claim, and the lender paid the borrower $12,630.32 as actual damages plus interest. The lender moved for summary judgment on the forfeiture issue. The trial court granted the lender’s motion, determining the borrower was not entitled to forfeiture. The borrower appealed. The court of appeals affirmed, holding that forfeiture is not an available remedy for the lender’s failure to charge the agreed upon interest rate.
The issue before the Texas Supreme Court was whether the term “obligations” in section 50(a)(6) encompasses all contractual terms in a home equity loan or only the terms and conditions set forth in section 50(a)(6) of the Texas Constitution. Tex. Const. art. XVI, § 50(a)(6)(Q)(x) (The constitutional provision providing for forfeiture states, in part, “if the lender or holder fails to comply with the lender’s or holder’s obligations under the extension of credit . . . .”). The Court adopted the narrower interpretation, holding that the term “obligations” refers only to the obligations found within section 50(a)(6). Thus, the forfeiture remedy does not extend to breaches of ordinary contractual terms, including the promotional interest rate provision in the loan.
In reaching this conclusion, the Court relied on the Constitution’s literal text, structure, and content of section 50(a)(6). Reading section 50(a)(6)’s provisions together as a whole, the Court explained that the structure of section 50(a)(6) and the curative measures in section 50(a)(6)(Q)(x) support limiting forfeiture to breaches of constitutionally mandated obligations.
The Court’s analysis included a discussion of the Constitution’s curative measures in section 50(a)(6)(Q)(x) and relied on Garofolo v. Ocwen Loan Servicing, L.L.C., in which the Court held that “forfeiture is available only if one of the six specific constitutional corrective measures would actually correct the lender’s failure to comply with its obligations under the terms of the loan.” 497 S.W.3d 474, 484 (Tex. 2016). The Court noted that these six curative measures address only breaches of constitutional obligations. Thus, these curative measures were not available to correct the billing error, and the lender’s alleged failure to implement such a cure did not result in forfeiture.
As a practical matter, though forfeiture is unavailable for breaches of ordinary contractual provisions, lenders and holders receiving notice of an alleged constitutional violation should carefully review the closing file to determine whether compliance can be demonstrated and, where appropriate, implement a cure under section 50(a)(6)(Q)(x) within 60 days.