States are tightening their oversight of home equity financing arrangements that give investors a share of a property's future value, with Massachusetts becoming the latest to impose new requirements on certain shared-appreciation mortgages.
A regulation that took effect Nov. 6 establishes disclosure, servicing, and reporting requirements for a specific category of shared-appreciation loans. It also defines when qualifying lenders can receive protection from certain consumer protection claims.
The Massachusetts action follows broader laws in Maine and Illinois that bring covered home equity investment agreements under mortgage lending requirements. Together, these developments are changing the regulatory landscape for a financing model that lets homeowners access equity without traditional monthly loan payments.
For companies originating, servicing, or investing in these agreements, the implications extend beyond borrower disclosures. State rules can affect licensing, repayment calculations, servicing obligations, and the legal risks attached to purchased contracts.
Massachusetts Sets New Conditions for Shared-Appreciation Loans
The Massachusetts regulation implements a provision of a 2024 state law governing certain shared-appreciation mortgages offered through qualifying tax-exempt organizations.
These transactions generally involve a new first mortgage accompanied by a second lien that entitles the lender to a percentage of the property's future appreciation. The statutory framework is directed at eligible homeowners facing mortgage delinquency or foreclosure-related circumstances.
Under the new regulation, qualifying lenders must provide disclosures showing the maximum potential repayment obligation, along with calculations illustrating the effective interest rate and the financial consequences of future home-price appreciation.
The rule requires an illustration using a 6.5% annual appreciation assumption, giving borrowers a clearer picture of how much they could owe if their home's value rises.
It also imposes servicing protections, including requirements drawn from federal mortgage servicing rules, even where the lender would not otherwise be subject to certain federal requirements.
Eligible entities must notify the attorney general before offering covered transactions and submit annual reports containing information about originations, repayments, and other loan activity.
The liability protection is narrowly defined. It does not shield lenders from claims involving advertising, underwriting, servicing, or collection practices.
Importantly, the regulation does not apply broadly to every home equity investment agreement sold in Massachusetts. Its provisions concern the particular shared-appreciation mortgage structure addressed by the state's 2024 legislation.
That distinction matters because states are taking different approaches to products that may share similar economic features but operate under different contractual arrangements.
Maine and Illinois Take Broader Approaches
Massachusetts' action follows a more sweeping regulatory change in Maine, where Gov. Janet Mills signed LD 1901 into law in April.
The legislation treats covered shared-appreciation agreements as mortgage loans under state law, bringing them within consumer lending requirements. It establishes protections addressing disclosures, counseling, and other aspects of the transaction.
As NMP previously reported, the law also raises concerns for investors purchasing these agreements because of provisions addressing assignee liability.
Illinois has adopted a different framework.
Under Public Act 103-1015, effective Jan. 1, 2025, the state expanded its Residential Mortgage License Act to include loans funded through shared-appreciation agreements.
The law defines these arrangements broadly, covering transactions in which consumers receive money or something of value in exchange for an interest in residential property or a future repayment obligation triggered by events such as a sale, maturity date, or death.
Illinois also requires counseling before borrowers become legally bound by covered agreements. The counseling requirement cannot be waived.
The state's framework brings these products within mortgage regulation rather than treating their absence of monthly payments as sufficient reason to exclude them.
Connecticut has also included shared-appreciation agreements within its residential mortgage lending statutes, adding to the different requirements providers must consider when operating across state lines.
Enforcement Adds Another Layer of Risk
Legislation is only part of the regulatory pressure.
In August, Minnesota Attorney General Keith Ellison announced a settlement with Unlock Partnership Solutions over home equity agreements that the state alleged violated mortgage lending requirements.
Minnesota contended that the agreements constituted mortgage loans subject to state laws governing licensing, interest rates, and consumer disclosures.
The settlement provided approximately $944,626 in monetary and debt relief. Unlock denied the allegations and agreed to comply with applicable mortgage lending requirements if it resumed the covered activities.
Massachusetts has pursued a separate enforcement action against Hometap Equity Partners.
In February 2025, Attorney General Andrea Joy Campbell sued the company, alleging that its home equity investment agreements violated state mortgage and consumer protection laws.
The allegations concern a different product structure from the nonprofit-related shared-appreciation mortgages addressed by Massachusetts' new regulation.
Taken together, the state actions show that the legal treatment of appreciation-based financing increasingly depends on the substance of the transaction, not simply how the provider markets or labels it.
Consumer Advocates Want Protections Extended
The National Consumer Law Center welcomed the Massachusetts regulation but argues that its limited scope leaves other home equity investment arrangements without sufficient protections.
The organization called for broader requirements covering home equity investment loans, including repayment caps, independent counseling, and clearer treatment of the products under mortgage lending laws.
"The new rules provide important safeguards and requirements for SAMs, and stronger and broader rules are needed to address the high-risk HEI loans that are now targeting Massachusetts homeowners," said Andrea Bopp Stark, a senior attorney at the organization.
Home equity investment agreements typically provide homeowners with an upfront payment in exchange for a future payment tied to the property's value. Unlike conventional HELOCs or closed-end second mortgages, many do not require monthly payments.
That feature can appeal to homeowners who have substantial equity but want to avoid additional monthly debt obligations.
The trade-off is a repayment amount that may increase considerably with property appreciation, often becoming due when the homeowner sells, refinances, or reaches the agreement's maturity date.
Providers have promoted these arrangements as alternatives to traditional borrowing, particularly for homeowners whose income or debt-to-income ratios make conventional financing less attractive.
NMP has previously covered that demand, including a Hometap survey finding that homeowners want more flexible ways to access equity.
What It Means
The new requirements are state-specific, but their implications extend beyond the states adopting them.
For lenders and investors offering home equity investment agreements nationally, the growing differences between state laws complicate expansion. A product that can be offered under one state's rules may require mortgage licensing, additional disclosures, or different servicing procedures in another. Companies purchasing these agreements must also consider whether state law creates liability for problems arising when the contracts were originated.
For brokers and LOs, the developments are worth watching as alternative home equity products compete with traditional HELOCs, closed-end second mortgages, and cash-out refinances. State restrictions could affect which products are available to borrowers, how they are structured, and which providers can offer them.
The broader significance is how regulators classify financing that allows homeowners to access equity without taking on conventional monthly payments. Several states have made clear that the absence of monthly payments does not necessarily place these arrangements outside mortgage lending laws.
As lenders and investors look for ways to serve homeowners with substantial equity but limited borrowing capacity, the regulatory treatment of appreciation-based financing will increasingly factor into product development, distribution, and investment decisions.
