Hometap at center of new HEI product lawsuit

The Massachusetts Attorney General has filed a lawsuit against home equity investment platform Hometap, the latest in a series of legal challenges for HEI providers accused of misleading claims and unfair deals for consumers.

The suit claims the Boston-based firm "pervasively and systematically" violated consumer protection laws using deceptive marketing that targeted vulnerable households and put them at future risk of foreclosure. The state alleged the company applied exorbitantly high interest rates on homeowners, issued mortgages without appropriate assessments or underwriting and provided "illegal" reverse loans.

HEI platforms allow clients to draw a percentage of their accrued home equity, with no requirement to make monthly payments. At the end of a contract term, homeowners repay an agreed-upon share of the property value, including any appreciation, plus fees. The contracts are sometimes referred to as shared-appreciation agreements.

"Amidst a growing affordability crisis, our lawsuit alleges that Hometap deliberately preyed upon financially vulnerable homeowners for profit, stripping them of their hard-earned home equity and putting them at unreasonably high risk of foreclosure," said Attorney General Andrea Joy Campbell in a press release. 

Hometap pushed back, saying it had offered to come to the table to work cooperatively with the state but found officials reluctant. Founded in 2018, the company has issued 563 agreements in Massachusetts. No clients have yet approached the end of their 10-year term nor reported foreclosures resulting from them. 

"Hometap firmly believes in the integrity of our products and the financial flexibility they provide to Massachusetts homeowners," the company said in a statement. 

"We have pursued every possible avenue to engage in constructive dialogue with the Massachusetts attorney general's office. Unfortunately, those efforts have not been reciprocated, and we believe they are pursuing an unfounded lawsuit predicated on meritless claims," the statement concluded. 

Taking a preemptive approach in filing the suit, the attorney general said the company's practices placed "unreasonable risk" of financial distress on Massachusetts homeowners in coming years. The move also served as a warning to other companies. 

"Our lawsuit seeks to not only hold Hometap accountable for its unlawful practices, but also put other companies on notice that my office will continually seek to protect communities from predatory business practices," Campbell said. 

The lawsuit mentioned instances when customers were surprised upon seeing the full amount of expenses after signing their HEI agreements, while also citing examples of Hometap sales representatives making supposedly misleading claims about the products. 

The attorney general also compared Hometap's contracts to reverse mortgages or subprime loans, which helped lead to the Great Financial Crisis. 

"The Hometap HEI is simply a new incarnation of these old products," the lawsuit stated. 

Through the lawsuit, the state seeks an order to declare each existing Hometap contract an "unlawful mortgage loan" and also requests restitution for consumers who had closed their agreements early equal to the full amount of ascertainable losses.

HEI providers have stood firm on how their home equity investment contracts are classified, underscoring they are not loans, and therefore, they are not obligated to adhere to the Truth in Lending Act, which applies to mortgage originators, as critics say they should.  

The emerging niche in the financial industry has seen the entry of several new companies over the past decade even amid controversies. As part of an effort to help establish consumer protections, Hometap alongside peer businesses Unlock Technologies and Point, helped establish a new industry collective of HEI companies in early 2025. Among the stated aims of the Coalition for Home Equity Partnership is a cooperative regulatory strategy, where the growing segment would work directly with state regulators. 

In addition to Hometap, other platforms currently involved in lawsuits include Unlock and Unison. Easyknock, another company at the center of regulatory enforcement in Massachusetts as well as several other states, shut its doors at the end of 2024.