Pennsylvania lawmakers are moving to bring home equity investment (HEI) companies under state banking oversight, with a floor vote scheduled June 1.
The legislation, House Bill 2120, would subject shared appreciation agreements to similar regulations as those governing traditional lenders.
The proposed action comes as a state representative accuses one company of attempting to “mislead” the legislative process — by offering $50 Amazon gift cards to customers who submitted opposing testimony.
State Rep. Arvind Venkat (D) said during a Pennsylvania House hearing in March that Point, a company that markets shared appreciation agreements, emailed customers before the hearing to offer gift cards in exchange for testimonials that oppose new regulation.
The solicitation and subsequent testimonials came without notice to the committee, Venkat added.
“These actions by Point are intended to mislead the members of this committee and the people of Pennsylvania by incentivizing a particular viewpoint for financial gain,” he said. “This is an outrageous corruption of the legislative process. House Bill 2120 serves to provide consumer protections for homeowners to preserve and understand the value of their most valuable asset — their home.”
A representative for Point did not immediately respond to HousingWire‘s request for comment. But Samuel Bjelac, the company’s newly appointed leader for third-party originations, recently addressed the spate of legal and regulatory actions in the HEI space.
“I can’t speak for other providers, but I can tell you that we provide, I think, a very solid homeowner education, a very solid originator training and ongoing education,” Bjelac said in an interview with HousingWire.
Bill would close ‘gray area’ loophole
House Bill 2120 would place shared appreciation agreements — contracts in which a homeowner receives funds in exchange for granting a third party future interest in the appreciation, equity or value of the home — under the same statutory safeguards as other financial products secured by real estate.
This would include disclosure requirements, foreclosure protections and remedies for violations.
The HEI industry largely operates outside state banking regulations because the agreements are not legally classified as loans, the Pittsburgh Post-Gazette said in a report published this week.
“These products aren’t considered loans,” Wendy Gilch, a Franklin Park consumer advocate who brought the issue to lawmakers, told the Gazette. “They’re not written in our laws. They’re in this weird gray area, so there’s many [banking] rules and consumer protections that don’t apply.”
Industry representatives argue the products are fundamentally different from loans.
Cliff Andrews, president of the Coalition for Home Equity Partnerships, said that applying banking rules designed for mortgages does not fit a product set with no monthly payment and no interest rate.
“Any regulation or law that would say you need to have an APR, we fundamentally just can’t calculate such a number,” he told the Gazette.
Venkat added that under a shared appreciation agreement, the more a home appreciates, the more the homeowner must pay to satisfy the contract — often far exceeding the amount originally received.
Parallel to MV Realty crackdown
Pennsylvania‘s effort mirrors a broader regulatory crackdown on other real estate contracts.
More than 30 states have passed legislation or secured court orders against MV Realty, a Florida-based brokerage that offered homeowners upfront payments of a few hundred to a few thousand dollars in exchange for 40-year exclusive listing agreements.
Unlike MV Realty’s model — which critics say functioned as a high-interest loan secured by a property lien — shared equity investments do not charge interest or require monthly payments.
Yet both products have faced similar criticisms. Homeowners who fail to understand the long-term financial consequences of the contracts can tie up what’s often their most valuable asset.
‘You sell your soul to the devil’
“For most Pennsylvanians, their home is their most valuable asset,” Venkat said during public testimony in March. “Homeowners may enter into these agreements believing they are making a beneficial decision for their family’s future, but when marketing is unfair or deceptive, they could face significant financial hardship down the road.”
A Pennsylvania homeowner who accepted $225,000 from Point in 2021 told the Gazette she did not fully understand how much future equity she was signing away.
Under the contract, the company is positioned to collect roughly 58% of her home equity.
“You sell your soul to the devil at the end,” the homeowner said. “And I don’t say that phrase lightly.”
The bipartisan House Bill 2120 is co-sponsored by Rep. Tim Twardzik (R) and Rep. Lindsay Powell (D), who co-chair the Pennsylvania Housing Caucus.
“Given the importance of homes and their value to so many Pennsylvanians, we must expeditiously bring shared appreciation agreements into a regulatory framework similar to that of mortgages so that Pennsylvanians can be assured transparency and protection against predatory lending practices in these products,” Venkat said.
This article was written by Jonathan Delozier and generated with the assistance of HousingWire Automation. It was reviewed by a HousingWire editor before publication. The system helps convert company announcements and industry data into HousingWire-style news coverage.
