Massachusetts AG sues Hometap over ‘unlawful reverse mortgage’
The Attorney General of Massachusetts has filed recede neatly with against dwelling equity contract supplier Hometap, alleging that the corporate “pervasively and systematically violated the reveal’s client protection felony pointers, including mortgage and foreclosures prevention felony pointers, inserting financially vulnerable dwelling owners at high possibility of losing their properties.”
The recede neatly with goes on to claim that Hometap’s predominant product choices — which give the corporate a little bit of a consumer’s future dwelling price in exchange for what it calls “debt-free cash” — constitutes a proposal of “unlawful reverse mortgages that fail to conform with reveal client protection felony pointers.”
The allegation echoes criticisms levied against the dwelling equity contract exchange by other states and the Particular person Monetary Protection Bureau (CFPB). For its section, Hometap told HousingWire’s Reverse Mortgage Day-to-day (RMD) that its efforts to engage with the felony official overall’s place of work accumulate “no longer been reciprocated,” calling the lawsuit “unfounded” and “meritless.”
The lawsuit
Attorney General Andrea Joy Campbell filed the lawsuit this week in Suffolk County Superior Court. The recede neatly with alleges that Hometap has hid the “high price and nature” of its dwelling equity contract merchandise, that are generally is named dwelling equity investments (HEIs).
“Amidst a rising affordability crisis, our lawsuit alleges that Hometap deliberately preyed upon financially vulnerable dwelling owners for profit, stripping them of their laborious-earned dwelling equity and inserting them at unreasonably high possibility of foreclosures,” Campbell said in an announcement of the submitting.
“Our lawsuit seeks to no longer most effective withhold Hometap accountable for its unlawful practices, but additionally set aside other corporations on test that my place of work will continually watch to give protection to communities from predatory exchange practices.”
Among the many core points, the AG alleges that Hometap charges “unlawfully high hobby” and offers “fleet cash” to its prospects with out “assessing monetary factors equivalent to profits, employment, and property aside from their dwelling.”
The corporate “deliberately markets its product to ‘house rich, cash uncomfortable’ dwelling owners which accumulate gargantuan dwelling equity but insufficient profits or other property, including the aged, retirees, those with a unhealthy credit score get dangle of rankings, and those with unpaid bank cards, student loans, or other debt,” Campbell alleges.
‘Unlawful reverse mortgage’ allegation
House equity contract merchandise originate no longer accumulate a minimal age requirement, a chief distinction between these choices and reverse mortgages.
Within the U.S., the Federal Housing Administration (FHA)’s House Equity Conversion Mortgage (HECM) program functions a minimal age requirement of 62. Proprietary merchandise offered straight by reverse mortgage lenders accumulate age requirements that, in some cases, recede appropriate down to 55.
Whereas Hometap asserts that its product choices are an “investment” and originate no longer constitute a mortgage, Campbell’s place of work as a change contends that Hometap offers an “unlawful reverse mortgage,” which she says is supported by the product’s functions.
“A reverse mortgage is one or extra advances of money secured most effective by a borrower’s predominant situation, based on the property’s equity or future appreciation, that does no longer require any payments till the mortgage becomes due, all of which the [attorney general’s office (AGO)] asserts are functions of Hometap’s HEI,” the place of work acknowledged.
Due to the that, Hometap has did no longer conform with Massachusetts requirements that govern reverse mortgage project in the reveal, the place of work alleges. These requirements consist of (but are no longer exiguous to) reserving reverse mortgages for those at the least 60 years veteran, a seven-day cancellation length and a Third-birthday party counseling requirement.
“The AGO asserts that Hometap’s conduct deprives consumers of well-known protections against losing their properties, since the ultimate honest reverse mortgage loans accessible in the Commonwealth change into due most effective when a borrower moves out, sells the dwelling, defaults, or dies,” the place of work outlined.
The recede neatly with goes on to articulate that Hometap has engaged in “inaccurate” marketing practices, including “pervasively obscur[ing] its devaluation of dwelling owners’ equity all the diagram by means of its marketing offers.” The AGO claims that “the product is if truth be told far extra costly to dwelling owners than its marketing suggests.”
RMD reached out to Hometap for observation on the lawsuit.
“Hometap firmly believes in the integrity of our merchandise and the monetary flexibility they present to Massachusetts dwelling owners,” the corporate said in an announcement. “We now accumulate got pursued every conceivable avenue to engage in optimistic dialogue with the Massachusetts felony official overall’s place of work. Sadly, those efforts accumulate no longer been reciprocated, and we predict about they’re pursuing an unfounded lawsuit predicated on meritless claims.”
The dwelling equity contract exchange has been under intensifying scrutiny for the previous few months. A lawsuit against one other supplier in Washington reveal equally alleges that these merchandise constitute a “a reverse mortgage stripped of the fundamental safeguards meant to give protection to dwelling owners,” in step with standpoint from an felony official representing the plaintiffs if that is the case.
In January, the CFPB under the leadership of frail director Rohit Chopra printed a yarn that takes a more in-depth come all the diagram by means of at dwelling equity contracts and over and over compares their product functions to reverse mortgages.
The bureau also filed an amicus transient in a New Jersey lawsuit, stating its location that a dwelling equity contract counts as a residential mortgage, and it incessantly aimed to corroborate that standpoint with comparisons to reverse mortgages.
