Key facts
- A new bill in the U.S. Senate seeks to regulate home equity investments (HEIs) by classifying them as residential mortgage loans.
- The proposed Home Equity Lending Integrity Act, introduced by Senator Jeff Merkley, would amend the Truth in Lending Act (TILA).
- If passed, the legislation would subject HEIs to federal disclosure and consumer protection requirements similar to traditional mortgages.
- The bill mandates the Consumer Financial Protection Bureau (CFPB) to establish regulations for enforcement and liability concerning HEIs.
- The growing demand for HEIs is driven by higher borrowing costs and difficulties in obtaining traditional financing.
A new bill introduced in the U.S. Senate aims to bring federal oversight to the burgeoning home equity investment (HEI) market. The Home Equity Lending Integrity Act, proposed by Senator Jeff Merkley (D-Ore.), seeks to amend the Truth in Lending Act (TILA) to explicitly define HEIs as residential mortgage loans. This classification would subject these financial products to existing federal consumer lending protections, including disclosure requirements.
The legislation directs the Consumer Financial Protection Bureau (CFPB) to develop regulations governing enforcement and civil liability for violations related to HEIs. A "sense of Congress" provision suggests lawmakers view this as a clarification of existing law rather than a substantive change.
Home equity investments allow homeowners to receive upfront cash in exchange for a share of their home's future appreciation, without taking on monthly payments. This makes them attractive to individuals who may not qualify for traditional loans, particularly those with credit scores below 600, as noted by the Urban Institute. The market has seen significant growth, with approximately 54,000 agreements originated by major providers like Point, Hometap, and Unlock between 2015 and 2025. Homeowners typically access about 15% of their home's value through these arrangements, and over 40% of users are aged 55 or older.
Consumer advocates have raised concerns about homeowners fully understanding the repayment calculations and potential future costs, especially if home values rise significantly. The bill's proponents argue it addresses a "regulatory mismatch" where existing rules were not designed for the structure of shared-equity products. Currently, oversight varies by state, with some pursuing restrictive legislation while others view HEIs as viable. The federal bill, if enacted, would establish a uniform framework.