The Massachusetts Legal professional Common has filed a lawsuit in opposition to house fairness funding platform Hometap, the newest in a sequence of authorized challenges for HEI suppliers accused of deceptive claims and unfair offers for customers.
The go well with claims the Boston-based agency “pervasively and systematically” violated shopper safety legal guidelines utilizing misleading advertising that focused susceptible households and put them at future threat of foreclosures. The state alleged the corporate utilized exorbitantly excessive rates of interest on owners, issued mortgages with out acceptable assessments or underwriting and supplied “unlawful” reverse loans.
HEI platforms enable purchasers to attract a share of their accrued house fairness, with no requirement to make month-to-month funds. On the finish of a contract time period, owners repay an agreed-upon share of the property worth, together with any appreciation, plus charges. The contracts are generally known as shared-appreciation agreements.
“Amidst a rising affordability disaster, our lawsuit alleges that Hometap intentionally preyed upon financially susceptible owners for revenue, stripping them of their hard-earned house fairness and placing them at unreasonably excessive threat of foreclosures,” mentioned Legal professional Common Andrea Pleasure Campbell in a press launch.
Hometap pushed again, saying it had provided to return to the desk to work cooperatively with the state however discovered officers reluctant. Based in 2018, the corporate has issued 563 agreements in Massachusetts. No purchasers have but approached the top of their 10-year time period nor reported foreclosures ensuing from them.
“Hometap firmly believes within the integrity of our merchandise and the monetary flexibility they supply to Massachusetts owners,” the corporate mentioned in a press release.
“We’ve pursued each attainable avenue to have interaction in constructive dialogue with the Massachusetts legal professional common’s workplace. Sadly, these efforts haven’t been reciprocated, and we imagine they’re pursuing an unfounded lawsuit predicated on meritless claims,” the assertion concluded.
Taking a preemptive method in submitting the go well with, the legal professional common mentioned the corporate’s practices positioned “unreasonable threat” of monetary misery on Massachusetts owners in coming years. The transfer additionally served as a warning to different corporations.
“Our lawsuit seeks to not solely maintain Hometap accountable for its illegal practices, but in addition put different corporations on discover that my workplace will frequently search to guard communities from predatory enterprise practices,” Campbell mentioned.
The lawsuit talked about cases when prospects had been stunned upon seeing the total quantity of bills after signing their HEI agreements, whereas additionally citing examples of Hometap gross sales representatives making supposedly deceptive claims in regards to the merchandise.
The legal professional common additionally in contrast Hometap’s contracts to reverse mortgages or subprime loans, which helped result in the Nice Monetary Disaster.
“The Hometap HEI is solely a brand new incarnation of those outdated merchandise,” the lawsuit said.
By the lawsuit, the state seeks an order to declare every current Hometap contract an “illegal mortgage mortgage” and in addition requests restitution for customers who had closed their agreements early equal to the total quantity of ascertainable losses.
HEI suppliers have stood agency on how their house fairness funding contracts are labeled, underscoring they aren’t loans, and due to this fact, they aren’t obligated to stick to the Fact in Lending Act, which applies to mortgage originators, as critics say they need to.
The rising area of interest within the monetary business has seen the entry of a number of new corporations over the previous decade even amid controversies. As a part of an effort to assist set up shopper protections, Hometap alongside peer companies Unlock Applied sciences and Level, helped set up a brand new business collective of HEI corporations in early 2025. Among the many said goals of the Coalition for House Fairness Partnership is a cooperative regulatory technique, the place the rising phase would work straight with state regulators.
Along with Hometap, different platforms presently concerned in lawsuits embody Unlock and Unison. Easyknock, one other firm on the middle of regulatory enforcement in Massachusetts in addition to a number of different states, shut its doorways on the finish of 2024.
