- The CFPB published its most detailed analysis of HEIs in January 2025 — an Issue Spotlight, consumer advisory, and amicus brief arguing HEIs may be mortgage loans under federal law.
- The Bureau found that HEI settlement amounts can grow at effective annual rates of 19.5–22% in the early years — comparable to credit card interest rates.
- The HEI industry responds that its products serve borrowers who can't qualify for HELOCs: no monthly payments, lower credit thresholds, and genuine risk-sharing.
- Contract terms are non-standardized — multipliers, rate caps, and settlement formulas vary by provider, making comparison shopping difficult.
- State-level regulation is accelerating: MA, WA, CT, MD, PA, and ME have all taken action or proposed legislation.
What Is a Home Equity Investment?
A home equity investment (HEI) — also called a home equity agreement or shared equity agreement — gives you a lump sum of cash today in exchange for a share of your home's future value. You're not borrowing money in the traditional sense: there are no monthly payments and no interest rate. Instead, you settle the agreement when you sell your home, refinance, or reach the end of the contract term (typically 10 to 30 years).
The settlement amount depends on what your home is worth at that point. If your home has appreciated, you'll owe the original amount plus the investor's share of that appreciation. If your home has lost value, you may owe less — but the contract structure often limits the provider's downside exposure.
Major HEI providers include Hometap, Point, Unlock, and Splitero. As of October 2024, the top four providers had originated roughly 37,000 contracts totaling an estimated $2–3 billion in market volume (CFPB Issue Spotlight, January 2025). For comparison, traditional HELOC lenders originated 1.2 million HELOCs during the four quarters ending Q2 2024. The HEI market is growing, but it remains a small fraction of home equity lending.
What the CFPB Found: Three Key Concerns
The CFPB's analysis raised three primary concerns about HEIs. Each deserves careful examination.
1. Settlement costs can be substantially higher than traditional loans
The CFPB's core finding was that HEI settlement amounts grow at an effective annual rate of roughly 19.5–22% in the early years of a contract — a rate the Bureau noted is higher than most home-secured credit and comparable to unsecured credit card debt (CFPB Issue Spotlight, January 2025).
The comparison isn't perfectly apples-to-apples, and the industry has pushed back on this framing. HEIs require no monthly payments during the term, which means a homeowner who can't qualify for or afford monthly HELOC payments may find HEIs more accessible. The CFPB acknowledged that HEIs serve homeowners who may not qualify for traditional lending products due to low credit scores or limited income.
2. Contract terms are complex and non-standardized
The CFPB found that HEI contracts vary significantly across providers. Some use a "share of total home value" model. Others use a "share of appreciation" model. Many include multipliers — for example, you receive 10% of your home's current value but owe 20% of its future value — and rate caps that limit how much your settlement can grow annually (typically 17–20%).
Because there's no standard disclosure format like the Loan Estimate required for mortgages, comparing HEIs to each other — or to traditional loans — is difficult. Some consumers reported surprise at settlement amounts and confusion about how multipliers and rate caps interacted (CFPB Issue Spotlight, January 2025).
The industry's Coalition for Home Equity Partnership (CHEP), whose members include Hometap, Point, and Unlock, has acknowledged this gap and has advocated for clearer regulatory frameworks. In Massachusetts, companion bills (H. 1106 and S. 705) introduced in early 2025 would establish specific disclosure obligations — legislation the industry has said it supports (HousingWire, November 2025).
3. The legal classification of HEIs remains unresolved
The CFPB filed an amicus brief in Roberts v. Unlock Partnership Solutions, arguing that the HEI at issue is a residential mortgage loan subject to the Truth in Lending Act (TILA). If courts accept this reasoning, HEI providers would need to comply with standard loan disclosures, ability-to-repay underwriting, and other consumer protections that currently don't apply.
The industry maintains that HEIs are fundamentally different from loans. Providers share in both the upside and downside of home value changes — a feature they argue places meaningful capital at risk. Hometap has described its products as "option contracts" rather than loans (National Mortgage News, August 2025).
What the Industry Says the CFPB Got Wrong
HEI providers have responded to the CFPB's analysis on several fronts, and their counterarguments are worth understanding.
CFPB's Position
- Settlement amounts grow at 19.5–22% annually in early years
- HEIs are more expensive than HELOCs under most scenarios
- Contract terms are complex and non-standardized
- Products echo pre-2008 risky loan structures
Industry's Position
- HEIs serve borrowers traditional lenders reject
- No monthly payments is a real structural advantage
- Providers share downside risk — not a one-sided loan
- Industry supports regulation — on appropriate terms
HEIs serve borrowers traditional lenders reject. HEI qualification thresholds are lower than those for HELOCs or home equity loans. Many HEI providers approve homeowners with credit scores as low as 500 and don't require income verification. For a homeowner with poor credit, high debt, or irregular income, the choice isn't between an HEI and a HELOC — it's between an HEI and no access to their equity at all.
No monthly payment is a real structural advantage. For homeowners on fixed incomes, retirees, or those facing temporary cash flow constraints, the absence of monthly payments is a meaningful feature. A HELOC at 7% on $50,000 costs roughly $292/month in interest alone during the draw period. An HEI costs nothing monthly, though the total settlement will often be larger.
The effective cost comparison depends on appreciation. In flat or declining markets, HEIs can cost less than traditional loans because the provider shares in the loss. This risk-sharing feature is the core of the industry's argument that HEIs are investments, not loans.
CHEP has expanded its membership and publicly supported state-level regulatory frameworks. The coalition's argument is not that HEIs should be unregulated, but that mortgage lending rules designed for amortizing debt products don't fit equity-sharing structures and would effectively ban the product rather than improve it.
The State-Level Landscape Is Moving Fast
While the federal regulatory picture remains uncertain — the CFPB's January 2025 actions came days before a change in administration — state-level activity has accelerated.
The Massachusetts attorney general sued Hometap in February 2025, alleging the company offered "illegal reverse mortgages" that violated consumer protection and usury laws. A judge denied Hometap's motion to dismiss in August 2025 and later blocked the company from claiming prior regulatory approval as a defense (HousingWire, December 2025). Hometap no longer lists Massachusetts among its operating states.
In Pennsylvania, Point faced criticism from bipartisan legislators after offering Amazon gift cards to customers who submitted testimony opposing a proposed regulation bill. Lawmakers called it a "corruption of our legislative process" (Spotlight PA, March 2026).
Already regulating HEIs as mortgage loans: Connecticut, Maryland, Washington. Active enforcement: Massachusetts (Hometap lawsuit). Legislation proposed: Pennsylvania, Maine. Pending lawsuits: Colorado, New York. The trajectory is clear: states are increasingly treating HEIs as products that warrant mortgage-level consumer protections.
What This Means for Homeowners Considering an HEI
The CFPB's report doesn't mean HEIs are scams. It means they're complex, expensive under certain scenarios, and undergoing the kind of regulatory scrutiny that new financial products typically face as they scale.
Understand the math before you sign. Ask the provider to show you what your total settlement would be under three scenarios: your home appreciates at 3%, 5%, and 7% annually. Compare that number to the total cost of a HELOC or home equity loan over the same period. Your actual cost will depend on your credit profile, home value trajectory, and contract terms — results vary significantly.
Read the multiplier and rate cap terms carefully. These two numbers determine how fast your settlement amount grows. A 2x multiplier on a $50,000 HEI means you're giving up twice your share of future appreciation. A 19% annual rate cap sounds like a limit, but compounding at that rate for 10 years produces a large number.
Know your exit options. Most HEI contracts require full settlement at the end of the term. If you can't sell, refinance, or pay the settlement in cash, you may face difficult choices. Ask the provider what happens if you can't settle at term — and get the answer in writing.
Consider whether you'd qualify for a HELOC first. With average HELOC rates at 7.03% as of April 1, 2026 (Bankrate) and many lenders approving credit scores as low as 620, a HELOC may be available to more homeowners than they assume. If you qualify for both, the HELOC will almost certainly cost less in total over a 10-year period in a rising market — though it does require monthly payments.
