United States District Court for the Middle District of North Carolina
Class Action Complaint
Case: 1:26-cv-515
Bryson attorneys are furthering a complaint that Hometap uses a deceptive and predatory scheme to disguise high-cost home loans as home equity investments.
Background
Hometap advertises that a homeowner can receive an upfront cash payment in exchange for an option to purchase a percentage interest in the homeowner’s home in the future. Hometap explicitly markets and states its product is not a loan, although the economic realities of the transaction dictate otherwise.
In practice, Hometap operates as a shadow lender, forcing homeowners to secure the transaction with a traditional Deed of Trust and Security Agreement that encumbers the property. Just like a standard mortgage lender, Hometap arms itself with a power of sale, threatening homeowners with foreclosure, loss of possession, and the appointment of a receiver if they fail to meet the company’s strict, ongoing property obligations.
Although these contracts are written in the form of an option purchase agreement, they are mortgage loans that include deceptive disclosures, illegal fees, and exorbitant effective interest rates.
Hometap also obtains thousands of dollars in investment fees and third-party closing costs, wile the option purchase agreement demands an annualized rate of return of up to 20%. This is a long and intricate agreement in which many homeowners do not understand that there is an actual dollar amount that Hometap plans on collecting in the future.
Regardless of how Hometap characterizes its product, in substance it gives homeowners an upfront cash advance in exchange for a secured interest in their property, with repayment (plus interest) due within a specified term, most commonly 10 years. In essence, this is a mortgage loan.
Bryson attorney: Scott Harris