The whole loan was on the line – here's the rule Texas lenders now live by
Texas home equity lenders just got breathing room: a $10,000 billing slip won't cost them the entire $700,000 loan.
On May 29, 2026, the Supreme Court of Texas drew a clear line that every lender working in the state should note. A lender forfeits an entire home equity loan only when it breaks an obligation written into the Texas Constitution – not for every ordinary mistake buried in a loan agreement.
The case started in early 2018. BBVA USA offered Parker Young a home equity line of credit at a promotional rate 0.26% below the Wall Street Journal prime rate. Young took the loan that May, secured by his Texas homestead. The line totaled about $700,000.
Then the math went sideways. In late 2020, Young found that BBVA had charged him about 0.01% below prime – not the 0.26% below he was promised. That worked out to roughly 0.25% more interest than the deal allowed. On December 2, 2020, he called the bank to report the error.
BBVA dug in. In a January 29, 2021 email, it denied any mistake and said Young never qualified for the promotional rate, because he hadn't drawn $25,000 within fifteen days of closing. But that requirement didn't apply to a loan secured by a Texas homestead, as Young pointed out. After that, the bank went silent.
The figures by then were substantial. Young had paid about $253,000 and still owed about $448,000 on the line. The overcharge came to about $10,000.
When sixty days passed with no fix, Young sued for breach of contract. He didn't just want his money back. He wanted the entire loan wiped out – principal and interest – under Article XVI, Section 50(a)(6)(Q)(x) of the Texas Constitution, the provision that forces a lender to forfeit a home equity loan if it fails to comply with its obligations and doesn't fix the problem within sixty days of notice. Young put his damages at over $600,000. BBVA, by then admitting the overcharge, put them at about $9,500 plus attorney's fees and moved to settle.
One question decided the case. Does that forfeiture remedy apply to any breach of a home equity loan agreement, or only to breaches of the obligations the Constitution itself lays out?
The trial court ruled for BBVA. The bank paid Young $12,630.32 – his actual damages plus interest. The court of appeals agreed, and so did the state's highest court.
Justice Jane N. Bland, writing for the court, held that "obligations under the extension of credit" means the specific terms and conditions listed in Section 50(a)(6) – not every promise in the contract. Her reasoning was practical. The Constitution gives lenders six ways to cure a breach and avoid forfeiture, and every one of them addresses a constitutional violation. None fixes an interest-rate billing error. The court relied on its 2016 ruling in Garofolo v. Ocwen Loan Servicing, which held forfeiture kicks in only when one of those six cures would actually correct the breach.
So where does that leave lenders? A billing mistake is a contract problem, with contract-sized damages – here, about $10,000, not $700,000. But miss a constitutionally required term, like the twelve-day cooling-off period or the mandated disclosures, and the entire loan is on the line. After this ruling, lenders operating in Texas know exactly which side of that line they're standing on.
