Senate Bill Would Subject Home Equity Investments to Federal Mortgage Disclosure Rules

The Bill: How a Federal Framework Would Change Home Equity Investment Disclosures

A bill introduced in the U.S. Senate would rewrite the rules for home equity investments (HEIs) by explicitly defining them as residential mortgage loans under the Truth in Lending Act. Senator Jeff Merkley’s Home Equity Lending Integrity Act would require HEI providers—companies that give homeowners cash upfront in exchange for a share of future home value—to comply with the same federal disclosure and consumer protection standards that apply to traditional cash-out refinances and home equity lines of credit.

If passed, the legislation would direct the Consumer Financial Protection Bureau (CFPB) to issue regulations governing enforcement and civil liability for HEI-related violations. The bill also contains a “sense of Congress” clause stating that lawmakers view the change as a clarification of existing law, not a substantive expansion. The measure has been referred to the Senate Committee on Banking, Housing, and Urban Affairs.

HEIs have grown in popularity as higher interest rates shut many homeowners out of conventional borrowing. An Urban Institute analysis found that about 35% of applications for cash-out refinances, home improvement loans, and home equity lines of credit were denied in 2024, while roughly one-quarter of HEI users had credit scores below 600—levels that often disqualify them from standard mortgage products. The three largest providers—Point, Hometap, and Unlock—originated about 54,000 agreements between 2015 and 2025.

Unlike a mortgage, an HEI has no monthly payments: homeowners remain in the property, cover taxes, insurance, and maintenance, and settle by selling the home or buying back the investor’s stake. That structure has sparked debate over whether HEIs are loans or investments. The proposed law would resolve that debate under TILA by labeling them “home equity investment loans” when they are secured by a home and require repayment based on property value.

What Federal TILA Coverage Means for Providers and Homeowners

The Regulatory Mismatch That Prompted the Bill

For years, HEIs have operated in a legal gray area. Because they don’t involve a fixed repayment schedule or interest in the traditional sense, they fell outside TILA’s disclosure framework, which was designed for conventional mortgages. Consumer advocates have questioned whether homeowners fully understand how repayment is calculated—especially if home values rise sharply, the amount owed can balloon. “The core issue is a regulatory mismatch,” said Unlock CEO Jim Riccitelli. “Existing rules and regulations weren’t designed for the structure of a shared-equity product.”

How Point, Hometap, and Unlock Would Be Affected

The three largest originators have signaled cautious openness to federal oversight. Cliff Andrews, president of the Coalition for Home Equity Partnership, said the industry “welcomes the regulatory attention” as the market scales. But the bill would impose real costs: providers would need to issue the same detailed disclosures—APR-equivalent calculations, total cost over time, and early payoff scenarios—that traditional lenders provide. Smaller or newer entrants could find the compliance burden prohibitive, potentially consolidating the market around larger, well-capitalized firms.

Consumer Protection vs. Product Innovation

Proponents argue that uniform disclosure requirements would help homeowners avoid surprises. HEI users tend to be older (over 40% are 55 or older) and often have limited borrowing alternatives; better information could prevent them from giving up a larger slice of equity than anticipated. Critics worry that applying a mortgage framework to an equity-sharing product could stifle innovation and limit access for the very borrowers HEIs were designed to serve. The bill’s “clarification” language attempts to minimize disruption, but the CFPB’s eventual rulemaking will determine how heavy-handed the new regime becomes.

The State Patchwork and Why Federal Action Matters

Currently, oversight of HEIs varies widely. Some states have moved to treat them as loans with strict caps, while others view them as a distinct, viable alternative to debt. Mayer Brown partner Holly Spencer Bunting described the landscape as “two sides of the coin.” A federal standard under TILA would override this patchiness, creating one set of rules for disclosures and enforcement nationwide. That could give providers clarity and, over time, make HEIs more comparable to traditional mortgage products for consumers.

Steps for Homeowners Considering a Home Equity Investment

For homeowners weighing an HEI, the bill’s potential passage changes the calculus. Until a federal framework is in place, consumers should:

• Ask for the TILA-style disclosures now. Even without a legal mandate, reputable providers like Point, Hometap, and Unlock may be willing to share detailed cost projections. Request a written breakdown of what you would owe at different home-value appreciation rates—similar to the “total cost” figures that would be required under the bill.
• Scrutinize the repayment calculation. Because HEIs charge a percentage of future value rather than interest, the effective cost can be much higher than a home equity loan if property values rise quickly. Get estimates for a range of appreciation scenarios (0%, 3%, 5% annually) before signing.
• Compare to a traditional home equity line of credit (HELOC) or cash-out refinance. Even if your credit score is below 600, some credit unions and community lenders offer alternatives that might carry lower long-term costs. The bill’s disclosure requirements would eventually make this comparison easier—but for now, you’ll need to do the math yourself.
• Monitor the bill’s progress. If enacted, HEI agreements signed before the CFPB rules take effect may not be subject to the new disclosures, so the terms you lock in today could be less transparent than those available later. Waiting for clear federal standards could save you from an agreement you don’t fully understand.