Policy makers target the ‘free money’ type of domestic currency

The fast-growing type of financing that guarantees homeowners money without monthly payments is facing intense scrutiny from state lawmakers — and the industry behind it is scrambling to deal with the consequences.

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

While the proposal is still in committee, the debate taking place in Harrisburg reflects a major national effort to determine whether these products are a new type of investment – or whether they work like mortgages and fall under existing consumer lending laws.

Participatory fight over the adoption of home equity

HB 2120 would amend the Penny Irest and Interest Loan Protection and Protection Act by specifically including shared faith agreements in the definition of a mortgage. If passed, shared equity agreements would be subject to the same interest rates, licensing standards and consumer protections that apply to traditional lending.

This law was introduced by Rep. Arvind Venkat after Wendy Gilch – a member of the Consumer Policy Center – brought the concerns to his office. Gilch has since worked with Venkat as an assistant in developing the proposal.

Gilch initially began investigating the products after seeing advertisements describing them as financing with “no debt,” “no interest” and “no monthly payments.”

“It’s like free money,” he said. “But in most cases, you’re giving up a growing portion of your home equity over time.”

To break up the argument

Shared equity providers (SEPs) argue that their products are not loans. Instead of charging interest or requiring a monthly payment, companies offer homeowners a lump sum in exchange for a share of future home appreciation, which is usually returned when the home is sold or paid off.

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 no monthly payments or interest, no minimum investment requirements and no liability if the home’s value declines.

Venkat, however, argues that the mechanics look familiar and argues that “a home security transaction should include transparency and consumer protection” – especially since, for many Americans, their home is their most valuable asset.

“These agreements include appraisals, licenses, closing costs and contingent payments,” he said. “If it looks like a mortgage and works like a loan, it should be treated like one.”

The bill sits within Pennsylvania’s anti-usury framework, which caps returns on home-secured loans in the single digits. Venkat said he has been told by industry representatives that they need a return of 18-20% to make the model work – especially if the contracts are to be sold to foreign investors. According to CHEP, its members offer a release based on the conditions that show the probability under different assumptions, with the final payment depending on the future value of the house and the length of time.

In a statement shared by Real Estate News, CHEP President Cliff Andrews said the group supports comprehensive legislation for shared products but argues that categorizing them as bloated uses a system that “was never designed for, and cannot be effectively applied to, equity-based property financing.”

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

Real Estate News also reached out to Unison, the largest retailer in the area, for comment on HB 2120. Hometap and Unlock were referred back to CHEP for comment.

A growing regulatory patchwork

Pennsylvania is not alone in seeking to enact legislation around HEIs. Maryland, Illinois and Connecticut have also taken steps to clarify that certain mortgage foreclosure agreements are subject to mortgage lending laws and licensing requirements.

In Washington state, a trial of whether a shared contract qualified as a reverse mortgage reached the Ninth Circuit before the case was settled and the opinion abandoned. Maine and Oregon considered similar claims, while Massachusetts pursued an action against a single provider related to home investment practices.

Taken together, these developments show that a state-by-state regulatory patchwork can emerge in the absence of a uniform federal body.

The push for homeownership protection

The debate over HEIs comes between high profits and reduced reinvestment – a situation that has increased the demand for alternative resource-access products.

But regulators appear to be increasingly scrutinizing the sector – especially if the absence of monthly payments and traditional interest charges change the legal nature of the lease-secured contract on the home.

Gilch argues that the divide is between consumer enlightenment. “If it’s secured by your home and you have to make repairs when you sell or refinance, homeowners should have the same protections they expect for any other home transaction,” he said.

Lessons from the domestic equity debate

For industry leaders, regulatory review can feel familiar. In recent years, unusual models of domestic standards have attracted enforcement actions and disputes when questions have arisen about the nature of the contract, the binding of the title or the understanding of the customers.

MV Realty, which offered upfront payments in exchange for long-term contracts, has faced regulatory scrutiny in several jurisdictions over how these contracts were recorded and reported. EasyKnock, which planned a sale-leaseback transaction aimed at unlocking home equity, has abruptly closed operations at the end of 2024 following competition and rising regulatory pressure.

Shared equity investment contracts are different from all models, but the episodes highlight a broad trend: new financial products can rise quickly in strong bonds. Soon, these domestic equity models will face legislative intervention when policymakers begin to examine how they fit within the existing law – and the formation of CHEP signatures that SEPs recognize logs.

For property managers and housing finance leaders, the effects of class action can prove significant. If shared equity contracts are implemented as mortgages in other countries, underwriting standards, return structures and secondary market capitalization may change.

If policymakers create a separate regulatory framework, the model can remain flexible – but focused on country-by-country negotiations.