Home Equity “Sharing” Agreements (HESA) go by many names, like “shared appreciation agreements” or “home equity investment options.” Unlike a home equity loan, HESAs are unregulated, deceptive, and predatory contracts between a homeowner and an investor in which the homeowner receives a sum of money upfront in exchange for a share of their home equity.
These agreements mislead consumers into thinking they are taking out a loan, rather than selling part of the value of their home for less than it's worth. Homeowners count on using their home equity to buy a new house, pay for end-of-life care, or fund retirement, but find themselves trapped in a downward spiral that often results in bankruptcy, foreclosure and eviction. There is currently no cap on the dollar amount or equity percentage an investor can receive from a HESA and these contracts are not subject to mortgage loan laws. Furthermore, these contracts prevent homeowners from refinancing and making home improvements while balloon payments leave homeowners owing far more than they originally received.
HB 2081 is common sense legislation that will protect Washington homeowners by bringing HESA contracts under the definition of a mortgage loan to ensure the same protections as traditional mortgages, capping the amount of equity an investor can take to make the cost to the consumer clearer, and prohibiting the investor from putting a lien on the property or otherwise inhibiting renting, refinancing, etc.
Tell your lawmakers: Regulate HESA to protect Washingtonians from abusive lending practices!
