Hometap Faces Class-Action Lawsuits Over 'Predatory' Practices

Home equity investment company Hometap is facing a wave of class-action lawsuits across multiple states, with plaintiffs alleging the firm misrepresented its financial products as "purchase option contracts" rather than mortgage loans. This alleged misrepresentation, according to complaints reviewed by Realtor.com®, allowed Hometap to circumvent federal and state borrower protections. A lawsuit filed in California claims Hometap introduced a "predatory and abusive mortgage loan product" targeting financially struggling homeowners. These civil actions follow a February lawsuit filed by the Massachusetts attorney general, who accused Hometap of violating state consumer protection and mortgage laws and placing vulnerable homeowners at "unreasonably high risk of losing their homes."

In response to the legal challenges, Hometap has denied the allegations. The company stated in a statement to Realtor.com® that its offerings are not subject to conventional mortgage regulations and are clearly marketed to consumers. Hometap emphasized its commitment to product transparency and homeowner education prior to contract signing. Despite the ongoing legal scrutiny, Hometap announced on Tuesday its expansion into five new states: Georgia, Montana, Tennessee, Idaho, and Delaware. The company cited public demand for "flexible, homeowner-first financial solutions" as the driver for this expansion.

Hometap CEO Jeffrey Glass stated that the demand observed in new markets indicates a shortfall in traditional financial products for many homeowners. He noted that nearly 10,000 homeowners from these newly entered states had previously sought flexible solutions from Hometap. Glass highlighted that millions of individuals possess home equity but lack accessible methods to leverage it, and Hometap aims to reach these individuals. Founded in 2017, Hometap's business model involves providing homeowners with upfront cash in exchange for a share of their home's future appreciation.