Customers slam Hometap with a wave of class action lawsuits

The HEI (Home Equity Investment) space is getting hit with a litany of lawsuits as more and more homeowners tap into their home equity.

Hometap is the latest HEI player hit with a series of lawsuits for violating the Truth in Lending Act and failing to treat their product as a mortgage loan. The recent cases have Loantap’s products described as illegal loans with excessively high interest rates.

The Boston-based Hometap is one of several HEI players in a real estate finance space which has grown in recent years. The products allow homeowners to access a percentage of their home's equity in cash, with no monthly payments.

Four class action complaints have been filed against Loantap in federal courts this year. Hometap has officially responded to one of those suits and argued that its product is not a mortgage loan.

Hometap is attempting to move the cases to arbitration, however, plaintiffs pointed out the TILA bars mandatory arbitration provisions in mortgage contracts. Hometap continually argues that its products are not mortgage related.

Aaron Rihn, partner at Robert Peirce & Associates, who has been retained by a customer of Hometap, argues that Hometap contracts are a mortgage product and thus subject to state and federal regulations.

"Hometap offers grossly unfair and unconscionable loans to homeowners facing financial difficulty who want to withdraw equity in their home," he wrote in an email.

Hometap declined to comment on the allegations.

Ryan Billey and Keicha Greenidge, both of New Jersey, filed a lawsuit against Hometap in February, in reference to the HEI loan they received for approximately $98,000.  The homeowners argue that the contract was underwritten without regard to their income, assets or future ability to settle.

If Hometap were to exercise its option contract today, they would owe over $177,000.00.

Billey and Greenidge described the contract as akin to a reverse mortgage without that product's consumer protections.

Several of the HEI documents signed by the plaintiffs refer to Hometap as a “lender” and described the transaction as a “mortgage loan” with a “borrower”.

This would contradict Hometap’s claim that their products are not mortgage related.

Billey and Greenidge want Hometap to cease issuing their option purchase agreements, and to stop collecting on them. A New Jersey judge will hear Hometap's motion to compel arbitration against those plaintiffs in late July.

Hometap indicated it will seek arbitration in a separate Pennsylvania suit. Hometap also has cases pending in North Carolina and California as well as Massachusetts.

Hometap continues to argue that its product is not a mortgage because it doesn't extend credit or create additional debt.  

The customers are not obligated to repay Hometap, the company argues.

Hometap Chief Compliance Officer Adam Jaskievic wrote in a declaration filed last week that Hometap entered a mortgage agreement to create an enforceable lien against the plaintiff’s property.

The company did not respond to specific questions as to whether the instrument clashes with Hometap's contention that their product is a mortgage.

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