Flexible financing or illegal reverse mortgage? Court allows suit over home equity investments to move forward

August 27, 2025

By Jennifer Smith

A lawsuit leveled by the state attorney general against a Boston-based financial technology company for allegedly predatory loan practices is allowed to move forward, after a Suffolk County Superior Court judge denied the company’s motion to dismiss the complaint.   

Hometap, founded in 2017, is part of a growing wave of home equity investment (HEI) products, which work by giving homeowners cash in exchange for a share of their home’s value. When the owner sells the house, refinances, or hits the end of the investment term, they owe the company the original investment plus a portion of the appreciation in home value.   

In Hometap’s view, their product exists “to make homeownership more accessible and less stressful” and is offered by a company comprised of “good owners and good neighbors.”  

To Attorney General Andrew Campbell, the company targets financially vulnerable homeowners with illegal reverse mortgages, marketed deceptively in violation of the state’s consumer protection laws.   

“In reality, this product is vastly more expensive than any common mortgage product on the market — and when consumers cannot pay, Hometap will sell their homes,” the attorney general’s office claimed in its first-in-the-nation suit against Hometap filed in February.  

Hometap moved to dismiss the complaint in May. HEIs cannot be illegal mortgage loans, Hometap argued, because they are not loans at all – rather they are option contracts that are not bound by the same regulations. Option contracts give investors, like Hometap, the option but not the obligation to buy or sell an asset.   

But Suffolk Superior Court Justice Debra Squires-Lee in an August 21 decision determined that the products could be considered loans and these arguments should be tested in the courts. Also needing further exploration, the judge wrote, are questions of whether the company was being deceptive, if its products are unfair or oppressive to homeowners, and if there are possible penalties under the state’s consumer protection statute. 

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