Home Equity Investment Contracts 2026: Laws, Costs, Lawsuits

What the contract is, in the CFPB's words

The Consumer Financial Protection Bureau's Office of Mortgage Markets published an “Issue Spotlight: Home Equity Contracts: Market Overview” on January 15, 2025. It describes a product in which “homeowners get an upfront payment from a company and, in exchange, must repay a single lump sum repayment in the future that is based, in part, on the home's value.” The homeowner keeps the right to live in the home and pays taxes, insurance and upkeep; repayment is due by the end of the term, “often 10 to 30 years,” or when a trigger such as a sale happens.

The market it described is small and concentrated: “dominated by four companies: Unison, Point, Hometap, and Unlock,” with smaller names including Aspire, Splitero, Balance Homes, EquiFi and QuantumRE. The CFPB put total volume at roughly $2 billion to $3 billion, against 1.2 million HELOCs originated in the four quarters ending 2024 Q2. In its review of securitizations, 89% to 95% of customers also had a first mortgage, typically about 40% of the home's value, and the median customer was in their 50s.

Three mechanics explain most of the cost, and the CFPB names all three. A multiplier gives the company a larger share of the home's value than the share it pays (a 10% payment for a 20% stake is a 2x multiplier). A discount to the starting value means appreciation is measured from a number below the appraisal. A rate cap limits how fast the settlement can grow; caps are “mathematically equivalent to a maximum interest rate on the initial payment,” and the CFPB found several around 18-20% compounded monthly, or about 19.5-22% a year. Its summary: “Home equity contracts are expensive compared to other home-secured financing options.”

The CFPB's 10-year example (a $500,000 home, $50,000 paid to the homeowner, a 20% stake and a 20% annual cap; hypothetical, not any one company's terms) produces a settlement of $86,400 in year 3 and $179,085 in year 10 if the home rises 6% a year, and $76,491 in year 3 and $81,149 in year 10 if the home first falls 30% and then recovers 3% a year. Across its four scenarios the year-10 payoff runs from $94,074 to $215,892. A $50,000 HELOC at 9%, interest only, costs $375 a month and $95,000 in total over 10 years including the $50,000 principal, so in the CFPB's arithmetic the contract is cheaper only if the home ends 5% or more below its starting value. The CFPB also reviewed 38 complaints: of the 21 with published narratives, six (29%) called the products “predatory.”

Is it a loan? The question behind every lawsuit

Companies call these contracts investments, and the CFPB quotes marketing sites that say “no interest” and no debt. The label matters because federal and state credit rules switch on if the contract is “credit.” Regulation Z's official commentary (Supplement I to 12 CFR Part 1026, comment 2(a)(14)-1) lists what is not credit, including “The execution of option contracts” and “Investment plans in which the party extending capital to the consumer risks the loss of the capital advanced.” The commentary's own example for the second exclusion is an investor who helps a home purchaser pay for the property in return for an ownership interest.

The CFPB took a position on this in a brief in a federal case in New Jersey against Unlock (No. 1:24-cv-01374, District of New Jersey, Document 56-1, filed January 15, 2025). It argued that the product “is credit because it grants a right to defer payment of a debt,” and that the investment-plan exclusion did not fit because Unlock “does not meaningfully risk the loss of its capital.” The facts it cited from the contract: a lump sum of about 44% of the home's value, in exchange for a duty to repay either 70% of the home's value or the initial payment plus 18% annual interest, due after a settlement event or after ten years. The Bureau's semi-annual report says that in February 2025 it withdrew the brief “after the Bureau's new leadership determined” that the brief “failed to account for several important principles of law” and that the Bureau “should engage in further consideration before taking any position on the issue.” The withdrawal removes the federal position; it does not decide the legal question (our reading). The brief is an advocacy document, and we did not retrieve a court ruling in that case.

States have not waited. Maryland's Commissioner wrote on June 5, 2023 that House Bill 1150 was “affirming the position of the Commissioner of Financial Regulation and the Office of the Attorney General that shared appreciation agreements are mortgage loans.” The Massachusetts Attorney General's complaint calls one company's product an unlawful reverse mortgage. The next sections give the texts.

State laws on home equity contracts, with citations and dates

This table covers the jurisdictions whose texts we could open and read on October 13, 2026. “Shared appreciation agreement” is the term in most statutes. Where a bill has not become law, the row says so.

State and federal rules specific to home equity contracts, as of October 13, 2026

Two details are easy to miss. In Maine the Legislature “adopts the ruling” of the Bureau of Consumer Credit Protection that took effect October 29, 2025, and declares any non-complying product made between that date and April 13, 2026 “void and unenforceable” (L.D. 1901, Part B). And in Illinois the rule treats a lender as having given due regard to ability to repay only if the agreement has no periodic payments and a term of at least five years, so a shorter contract does not get that safe harbor (our reading of 38 Illinois Administrative Code 1050.2340).

We left out jurisdictions whose own text we could not open on October 13, 2026. Trade press has reported bills in Pennsylvania and North Carolina and a Minnesota Attorney General settlement with Unlock; the Minnesota and California regulators' sites and the Pennsylvania and North Carolina legislature pages did not open for us, so we could not confirm any of these from primary pages, and we found no Oregon text. Check each before relying on a state not in the table.

Lawsuits, settlements and regulator actions

Allegations in a complaint are not findings. The rows below say who filed, where, and what the filing or the agency's own release reports.

Court and enforcement actions on home equity contracts, as of October 13, 2026

The Colorado settlement is the clearest regulator outcome in our sources: the state treated the contract as credit, applied its interest rate limits, and obtained restitution. The Massachusetts complaint is the most detailed public description of one company's contract, which is why the next section uses it.

What the contracts say: published terms

These are the companies' own pages and one complaint, read on October 13, 2026. A company website is the company's claim, and terms change by state and by date. We could not open Hometap's or Unison's own sites (they returned errors to our requests).

Published terms of home equity contracts, as read October 13, 2026

Unlock's page shows an example that does not add up on its face: a $600,000 home, a $60,000 payment (10%), a 3% yearly rise to $806,000 after 10 years, and a share “calculated by multiplying the ending home value by the Unlock percentage of 17%” shown as $161,200. Seventeen percent of $806,000 is $137,020, and $161,200 is 20.0% of $806,000 (our arithmetic). The page's calculator is interactive, so we cannot tell which figure is current. Ask any company for the dollar payoff in writing.

Point's page and others advertise “no monthly payments,” and that is accurate; the CFPB's concern is that the lump sum at the end can be large and that taxes, insurance and upkeep stay with the homeowner. Whether any of this beats a HELOC depends on the house and the borrower. Our HELOC guide and cash-out refinance guide cover the conventional options for investment properties; the contracts discussed here are mostly written on owner-occupied homes.

Worked example: what $50,000 costs on four price paths (our arithmetic)

We apply two sets of published terms to the CFPB's home: $500,000, a $50,000 payment (10% of value) and a 10-year term. Aspire's formula comes from its FAQ; the Hometap-type column uses the terms the Massachusetts complaint describes (20% of ending value, 20% compound cap, 3% fee). Net cash is $48,500 after a 3% fee; third-party costs are ignored, which makes the annualized figures a little low. Annualized cost is the payoff divided by $48,500, raised to the power 1/10, minus 1.

Year-10 payoff on a $50,000 payment, $500,000 home (our arithmetic from published terms)

How we got these. Aspire: starting value $425,000 (85% of $500,000); share 10% x 3.25 = 32.5%; payoff = $50,000 + 32.5% x (ending value - $425,000); the 18% cap compounded monthly for 10 years would be $298,466, which none of the paths reaches. Hometap-type: payoff = 20% x ending value; the 20% compound cap for 10 years would be $309,587, also not reached. Two checks against the CFPB: Aspire's 12% cap over 3 years on $50,000 is $71,538 (our arithmetic), the same figure the CFPB shows for a 3-year payoff from one company's online calculator (its footnote cites Aspire's); and 20% of the 6% path is $179,085, the CFPB's year-10 number.

Read it as a range, not a quote: the same terms cost under 5% a year if the home falls or stays flat on Aspire's formula, 7.5% on the Hometap-type terms if it stays flat, and 13% to 15% a year if the home rises 5% to 6% a year. For the contract in the CFPB's New Jersey brief (44% paid, 70% owed), the same $500,000 home means $220,000 paid and $350,000 owed if prices stay flat, $470,371 after 10 years at 3% a year, and the 70% share falls below the amount paid only if the home loses more than 37% of its value (our arithmetic: 44 divided by 70 is 62.9%).

What happened in Washington when contracts ended

Washington's Department of Financial Institutions asked ten providers for data in 2024. It cautioned that it “cannot, and does not, purport to substantiate the veracity of the responses.” Using what five providers reported on active contracts and four on ended ones:

• About 2,466 Washington transactions were reported; the average agreed starting value was $585,928.28, the average initial payment $100,734.09, the average share of future equity or appreciation 40.46%, the average term 21.08 years and the average transaction fee $3,659.36.
• Of about 456 ended contracts (sale or buyout), the average actual term was 20.42 months, the average amount due at termination was $111,716.21, and the average growth between the initial payment and the amount due was 59.74%.
• 98% of ended contracts ended with a payment to the company; where payment was due, the company received more than it had paid in 95% of them, by $407.00 to $370,650.00 more, an average of $45,504.78.
• Losses: one provider reported a 1.4% loss rate, another 0.8% and a third 12%; the report says “when averaged across all HESA providers there is a loss rate of less than five percent.”
• “Many of the terminated transactions had a relatively short term, indicating that HESA products may be used as an alternative to high-cost bridge loans.” Our bridge loan guide covers the standard version of that product.

The 59.74% is an average of percentages across contracts of very different lengths, so it is not an annual rate (our reading).

What the money behind the contracts says (SEC filings)

Redwood Trust (CIK 930236) is the SEC filer that owns Aspire. Its Form 10-Q for the quarter ended June 30, 2026 (filed August 5, 2026) reports home equity investments of $339,735 thousand at fair value, up from $329,883 thousand at December 31, 2025, and states: “During the second quarter of 2026, we discontinued origination of new HEI contracts through Aspire HEI. As a result, we are no longer originating or acquiring new HEI contracts as of June 30, 2026.” It also says it had “ceased allocating capital to new investments in third-party originated HEI contracts.” Its fair value inputs for HEI are an 8% discount rate, a 14% annual prepayment rate (range 8-15%) and 4% home price appreciation. HEI income, net was $9,907 thousand for the six months ended June 30, 2026, against a loss of $2,733 thousand a year earlier.

Securitization filings show where the contracts go. A full-text search of SEC EDGAR on October 13, 2026 for “home equity investment” in ABS-15G filings since January 2024 returns 12 filings from nine depositor entities, among them Unison Midgard Fund Depositor LLC, BOAC HOWL Point Depositor 25-1 LLC and BOAC HOWL Splitero Depositor 25-1 LLC (a phrase hit, not proof that each deal is an HEI deal; counts are ours). In the due diligence report filed May 9, 2025 for the Point deal, the diligence firm says it “did not review or test” the contracts for compliance with consumer protection laws, and records that the client “confirms and represents” the contracts “are not mortgage loans or debt.” That is a representation by the seller, not a finding, and it is the same question the states and the CFPB are now answering differently.

What a homeowner can do with this

This is analysis of public documents, not advice. Points the documents support:

• Get the payoff in dollars, in writing. Ask for the settlement amount at years 5 and 10 and at the maximum term, with home prices falling, flat and rising. Connecticut's law requires exactly these scenarios from licensed lenders (Public Act 25-115, section 25); in other states you may have to ask.
• Compare on total cost, not on the monthly payment. The CFPB's HELOC comparison is above. If you are 62 or older, the CFPB notes that federally insured reverse mortgages (HECMs) require counseling from a HUD-certified agency before origination and generally let you stay in the home until you move or die rather than requiring repayment after a set period.
• Plan the end of the term. The CFPB warns that homeowners who cannot pay the full settlement “risk having to sell their home or face foreclosure.” Ask how the contract is paid off, whether partial payments are allowed (the CFPB says they generally are not), and what happens if you default on the first mortgage, property tax or insurance.
• Check your state's rules. Maine gives a 3-day right of rescission and requires counseling; Illinois requires counseling from an independent HUD-certified counselor; Connecticut, Maryland and Maine require a license. Maine's Bureau of Consumer Credit Protection says licensed lenders can be verified through the Nationwide Multistate Licensing System Consumer Access portal.
• Look at the lien. The CFPB says the company secures its interest with a lien “just as lenders do for traditional mortgages,” which can limit refinancing your first mortgage.

FAQ

Sources, read and saved on October 13, 2026: CFPB Issue Spotlight: Home Equity Contracts: Market Overview (January 15, 2025); CFPB amicus brief, Case 1:24-cv-01374, Document 56-1 (January 15, 2025); CFPB Semi-Annual Report to Congress, Spring 2025; Regulation Z Supplement I, comment 2(a)(14) (CFPB); Maryland House Bill 1150 (2023), Commissioner of Financial Regulation advisories of June 5, 2023 and January 28, 2025, and the Maryland Register notice for COMAR 09.03.15; Illinois Register, Volume 50, Issue 24 (June 12, 2026), 38 Illinois Administrative Code 1050 (copy of the Register pages); Connecticut Public Act 25-115 and Office of Legislative Research report 2026-R-0028; Maine L.D. 1901 (enrolled text), the Legislature's bill page and the Bureau of Consumer Credit Protection release of July 13, 2026; Washington Department of Financial Institutions press release and Home Equity Sharing Agreement Inquiry Report (September 12, 2024); S. 4803 and H.R. 8116 (GovInfo); Ninth Circuit memorandum, No. 23-2835 (August 7, 2025); Massachusetts Attorney General press release (February 20, 2025) and complaint, read through Internet Archive captures because the state server refused our connection; Colorado Attorney General release of June 24, 2026; Unlock, Aspire and Point web pages (October 13, 2026); Redwood Trust Form 10-Q for June 30, 2026 (accession 0000930236-26-000027); SEC EDGAR full-text search output for ABS-15G filings and the diligence report in accession 0000929638-25-001825. Worked examples and counts are ours. This is analysis of public documents, not investment, legal or tax advice.