The state alleges that Hometap’s flagship residence fairness funding (HEI) product is an “unlawful, misleading, oppressive and unconscionable mortgage that violates the prison usury statute.”
Squires-Lee’s ruling signifies that Hometap can’t argue that earlier interactions with state regulators — together with conferences wherein the corporate says it described its product and was not advised to cease — stop the AG from pursuing the case.
The case itself is continuing, with the court docket permitting restricted discovery associated to what Hometap was advised by regulators — however it won’t grant entry to inner authorities deliberations.
State alleges predatory practices
The litigation, filed in February 2025 by Massachusetts Lawyer Common Andrea Pleasure Campbell, accuses Hometap of widespread violations of state client safety statutes, together with mortgage and foreclosure prevention legal guidelines.
The grievance alleges the corporate “pervasively and systematically violated the state’s client safety legal guidelines, together with mortgage and foreclosures prevention legal guidelines, placing financially susceptible householders at excessive threat of dropping their houses.”
On the middle of the case are Hometap’s HEIs. In alternate for what the corporate markets as “debt-free money,” householders agree to offer Hometap a share of their residence’s future worth.
State officers argue these preparations should not true investments, however moderately “unlawful reverse mortgages that fail to adjust to state client safety legal guidelines.”
Campbell mentioned the corporate’s practices goal householders with restricted monetary choices.
“Amidst a rising affordability disaster, our lawsuit alleges that Hometap intentionally preyed upon financially susceptible householders for revenue, stripping them of their hard-earned home equity and placing them at unreasonably excessive threat of foreclosures,” Campbell mentioned when saying the go well with.
‘Unlawful reverse mortgage’ declare
Hometap maintains that its HEIs are investments, not loans.
The lawyer normal’s workplace disagrees, pointing to options it says mirror reverse mortgages.
In contrast to federally insured reverse mortgages — which require debtors to be no less than 62 years previous — and plenty of proprietary products with a minimal age of 55, Hometap’s merchandise haven’t any age requirement.
Massachusetts legislation restricts reverse mortgages to debtors who’re no less than 60. The state additionally requires protections reminiscent of a seven-day cancellation interval and necessary third-party counseling.
As a result of Hometap doesn’t comply with these guidelines, shoppers are disadvantaged of safeguards meant to forestall foreclosures and the lack of a house, the state argues.
Hometap has referred to as the lawsuit baseless.
“Hometap firmly believes within the integrity of our merchandise and the monetary flexibility they supply to Massachusetts householders,” the corporate beforehand advised HousingWire‘s Reverse Mortgage Every day. “We’ve pursued each potential 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 Massachusetts case continues as residence fairness contracts face mounting scrutiny nationwide.
A Washington state lawsuit over whether or not residence fairness investments are disguised as reverse mortgages ended with a settlement in October after a Ninth Circuit Court docket of Appeals panel dominated that Unison’s product certified as a reverse mortgage.
Related lawsuits towards HEI suppliers are pending in Colorado and New York.
