THE HOME EQUITY TRAP — How “Investments” Could Be Predatory Loans in Disguise
Think you’re partnering with a lender in your home’s value? Think again
“Home Equity Investment” agreements may be predatory loans that threaten your equity and your future. Learn how R23 Law’s California Consumer Protection Attorneys can help.
When “Shared Equity” Isn’t Really Shared
Home Equity Investments (HEIs) are being marketed as innovative financial solutions—especially to older or cash-strapped homeowners. The pitch is appealing: no monthly payments, just fast cash in exchange for a share of your home’s future appreciation.
But don’t let the marketing fool you.
Multiple courts and consumer protection agencies now recognize these so-called investments for what they really are: disguised high-cost loans that can strip homeowners of their equity and trap them in financially devastating contracts.
What Is a Home Equity “Investment”?
A typical HEI offers you a lump-sum payout now, and in return, the company claims a percentage of your home’s future value. There are:
No monthly payments
No traditional interest
But a massive lien placed on your property
Many contracts last 10–30 years and require repayment when you sell, refinance, move out, or die. The lender’s cut can be 50%–70% of your home’s appreciation.
What’s worse? These companies often:
Skip any real underwriting
Leave you fully responsible for taxes, maintenance, and insurance
Structure contracts to maximize their return with minimal risk—at your expense
Courts Are Calling It Out
Consumer lawsuits and judicial rulings are making it clear: these deals aren’t investments—they’re predatory lending in disguise.
Here’s what courts found in 2025:
The Ninth Circuit ruled Unison’s “no interest” product was in fact a loan, triggering lending law protections
A Massachusetts trial court struck down Hometap’s HEI contracts for violating mortgage lending and usury laws
A Colorado bankruptcy court ruled that HEIs can be treated as loans—even in bankruptcy proceedings
Across the country, courts are focusing on substance over spin: If it functions like a loan, it must follow lending laws.
How HEI Companies Target Homeowners
These companies often use:
High-pressure sales tactics
Confusing contracts over 100 pages long
Misleading terms like “shared risk” or “partnership”
But their internal investor materials tell a different story: the deals are built to deliver high returns for investors, not to help homeowners build wealth.
What You Can Do If You Signed One
If you’re currently locked into a home equity investment—or being pressured to sign one—you may have legal options.
Potential claims include:
Violations of consumer protection or unfair trade practices laws
Usury and reverse mortgage violations
Fraud or misrepresentation
Unconscionable contract terms
Bankruptcy defenses
R23 Law’s California Consumer Protection Attorneys can review your agreement and determine if it qualifies as an illegal or unfair loan under state or federal law.
Protect Your Equity Before It’s Too Late
HEIs are often pitched as no-risk ways to unlock home value. But many homeowners find out the truth only after they try to sell or refinance—and discover they owe tens or hundreds of thousands more than expected.
If you’ve signed one of these contracts, or are being pressured to, talk to an experienced attorney before the company tries to collect.
Contact R23 Law’s California Consumer Protection Attorneys
At R23 Law, we fight back against predatory financial practices—especially those disguised as “partnerships.”
We’ve seen how deceptive equity-sharing agreements can destroy homeownership and wipe out family wealth. Our attorneys are prepared to:
Review your contract
Explain your legal rights
Fight for cancellation, restitution, or relief
Pursue claims under California and federal lending laws
📞 Schedule your free consultation today. We serve clients across California and offer multilingual legal services.
