The lawsuit
Lawyer Normal Andrea Pleasure Campbell filed the lawsuit this week in Suffolk County Superior Courtroom. The swimsuit alleges that Hometap has hid the “excessive price and nature” of its house fairness contract merchandise, that are also referred to as house fairness investments (HEIs).
“Amidst a rising affordability disaster, our lawsuit alleges that Hometap intentionally preyed upon financially susceptible householders for revenue, stripping them of their hard-earned house fairness and placing them at unreasonably excessive threat of foreclosures,” Campbell mentioned in an announcement of the submitting.
“Our lawsuit seeks to not solely maintain Hometap accountable for its illegal practices, but additionally put different corporations on discover that my workplace will regularly search to guard communities from predatory enterprise practices.”
Among the many core points, the AG alleges that Hometap fees “unlawfully excessive curiosity” and presents “quick money” to its shoppers with out “assessing monetary components resembling earnings, employment, and property apart from their house.”
The corporate “intentionally markets its product to ‘home wealthy, money poor’ householders which have substantial house fairness however inadequate earnings or different property, together with the aged, retirees, these with low credit score scores, and people with unpaid bank cards, pupil loans, or different debt,” Campbell alleges.
‘Unlawful reverse mortgage’ allegation
House fairness contract merchandise don’t have a minimal age requirement, a chief distinction between these choices and reverse mortgages.
Within the U.S., the Federal Housing Administration (FHA)’s House Fairness Conversion Mortgage (HECM) program includes a minimal age requirement of 62. Proprietary merchandise provided immediately by reverse mortgage lenders have age necessities that, in some circumstances, go all the way down to 55.
Whereas Hometap asserts that its product choices are an “funding” and don’t represent a mortgage, Campbell’s workplace as an alternative contends that Hometap presents an “illegal reverse mortgage,” which she says is supported by the product’s options.
“A reverse mortgage is a number of advances of cash secured solely by a borrower’s major residence, primarily based on the property’s fairness or future appreciation, that doesn’t require any funds till the mortgage turns into due, all of which the [attorney general’s office (AGO)] asserts are options of Hometap’s HEI,” the workplace said.
Due to that, Hometap has did not adjust to Massachusetts necessities that govern reverse mortgage exercise within the state, the workplace alleges. These necessities embody (however will not be restricted to) reserving reverse mortgages for these no less than 60 years previous, a seven-day cancellation interval and a third-party counseling requirement.
“The AGO asserts that Hometap’s conduct deprives customers of necessary protections towards dropping their properties, as a result of the one lawful reverse mortgage loans obtainable within the Commonwealth grow to be due solely when a borrower strikes out, sells the house, defaults, or dies,” the workplace defined.
The swimsuit goes on to allege that Hometap has engaged in “misleading” advertising practices, together with “pervasively obscur[ing] its devaluation of householders’ fairness all through its advertising supplies.” The AGO claims that “the product is definitely way more expensive to householders than its advertising suggests.”
RMD reached out to Hometap for touch upon the lawsuit.
“Hometap firmly believes within the integrity of our merchandise and the monetary flexibility they supply to Massachusetts householders,” the corporate mentioned in an announcement. “We’ve got pursued each attainable avenue to interact in constructive dialogue with the Massachusetts lawyer normal’s workplace. Sadly, these efforts haven’t been reciprocated, and we consider they’re pursuing an unfounded lawsuit predicated on meritless claims.”
The house fairness contract business has been beneath intensifying scrutiny for the previous few months. A lawsuit towards one other supplier in Washington state equally alleges that these merchandise represent a “a reverse mortgage stripped of the important safeguards meant to guard householders,” in response to perspective from an lawyer representing the plaintiffs in that case.
In January, the CFPB beneath the management of former director Rohit Chopra printed a report that takes a more in-depth take a look at house fairness contracts and repeatedly compares their product options to reverse mortgages.
The bureau additionally filed an amicus transient in a New Jersey lawsuit, stating its place {that a} house fairness contract counts as a residential mortgage, and it typically aimed to corroborate that perspective with comparisons to reverse mortgages.
