Lawmakers target ‘free money’ home equity finance model

A fast-growing home equity financing model that promises homeowners cash without monthly payments is facing mounting scrutiny from state lawmakers — and the industry behind it is mobilizing to shape the outcome.

In Pennsylvania, House Bill 2120 would classify shared equity contracts — often marketed as home equity investments (HEIs), shared appreciation agreements or home equity agreements — as residential mortgages under state law.

While the proposal is still in committee, the debate unfolding in Harrisburg reflects a broader national effort to determine whether these products are truly a new category of equity-based investment — or if they function as mortgages and belong under existing consumer lending laws.

A classification fight over home equity capture

HB 2120 would amend Pennsylvania’s Loan Interest and Protection Law by explicitly including shared appreciation agreements in the residential mortgage definition. If passed, shared equity contracts would be subject to the same interest caps, licensing standards and consumer protections that apply to traditional mortgage lending.

The legislation was introduced by Rep. Arvind Venkat after constituent Wendy Gilch — a fellow with the consumer watchdog Consumer Policy Center — brought concerns to his office. Gilch has since worked with Venkat as a partner in shaping the proposal.

Gilch initially began examining the products after seeing advertisements describe them as offering cash with “no debt,” “no interest” and “no monthly payments.”

“It sounds like free money,” she said. “But in many cases, you’re giving up a growing share of your home’s equity over time.”

Breaking down the debate

Shared equity providers (SEPs) argue that their products are not loans. Instead of charging interest or requiring monthly payments, companies provide homeowners with a lump sum in exchange for a share of the home’s future appreciation, which is typically repaid when the home is sold or refinanced.

The Coalition for Home Equity Partnership (CHEP) — an industry-led group founded in 2025 by Hometap, Point and Unlock — emphasizes that shared equity products have zero monthly payments or interest, no minimum income requirements and no personal liability if a home’s value declines.

Venkat, however, argues that the mechanics look familiar and argues that “transactions secured by homes should include transparency and consumer protections” — especially since, for many many Americans, their home is their most valuable asset. 

“These agreements involve appraisals, liens, closing costs and defined repayment triggers,” he said. “If it looks like a mortgage and functions like a mortgage, it should be treated like one.”

The bill sits within Pennsylvania’s anti-usury framework, which caps returns on home-secured lending in the mid-single digits. Venkat said he’s been told by industry representatives that they require returns approaching 18-20% to make the model viable — particularly if contracts are later resold to outside investors. According to CHEP, its members provide scenario-based disclosures showing potential outcomes under varying assumptions, with the final cost depending on future home values and term length.

In a statement shared with Real Estate News, CHEP President Cliff Andrews said the group supports comprehensive regulation of shared equity products but argues that automatically classifying them as mortgages applies a framework “that was never designed for, and cannot meaningfully be applied to, equity-based financing instruments.”

As currently drafted, HB 2120 would function as a “de facto ban” on shared equity products in Pennsylvania, Andrews added.

Real Estate News also reached out to Unison, a major vendor in the space, for comment on HB 2120. Hometap and Unlock deferred to CHEP when reached for comment. 

A growing regulatory patchwork

Pennsylvania is not alone in seeking to legislate regulations around HEIs. Maryland, Illinois and Connecticut have also taken steps to clarify that certain home equity option agreements fall under mortgage lending statutes and licensing requirements.

In Washington state, litigation over whether a shared equity contract qualified as a reverse mortgage reached the Ninth Circuit before the case was settled and the opinion vacated. Maine and Oregon have considered similar proposals, while Massachusetts has pursued enforcement action against at least one provider in connection with home equity investment practices.

Taken together, these developments suggest a state-by-state regulatory patchwork could emerge in the absence of a uniform federal framework.

The push for homeowner protections

The debate over HEIs arrives amid elevated interest rates and reduced refinancing activity — conditions that have increased demand for alternative equity-access products. 

But regulators appear increasingly focused on classification — specifically whether the absence of monthly payments and traditional interest charges changes the legal character of a contract secured by a lien on a home.

Gilch argues that classification is central to consumer clarity. “If it’s secured by your home and you have to settle up when you sell or refinance, homeowners should have the same protections they expect with any other home-based transaction,” she said.

Lessons from prior home equity controversies

For industry leaders, the regulatory scrutiny may feel familiar. In recent years, unconventional home equity models have drawn enforcement actions and litigation once questions surfaced around contract structure, title encumbrances or consumer understanding.

MV Realty, which offered upfront payments in exchange for long-term listing agreements, faced regulatory action in multiple states over how those agreements were recorded and disclosed. EasyKnock, which structured sale-leaseback transactions aimed at unlocking home equity, abruptly shuttered operations in late 2024 following litigation and mounting regulatory pressure.

Shared equity investment contracts differ structurally from both models, but those episodes underscore a broader pattern: novel housing finance products can scale quickly in tight credit cycles. Just as quickly, these home equity models encounter regulatory intervention once policymakers begin examining how they fit within existing law — and the formation of CHEP signals that SEPs recognize the stakes.

For real estate executives and housing finance leaders, the outcome of the classification fight may prove consequential. If shared equity contracts are treated as mortgages in more states, underwriting standards, return structures and secondary market economics could shift.

If lawmakers instead carve out a distinct regulatory category, the model may retain more flexibility — but face ongoing state-by-state negotiation.