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Senator seeks to bring home equity investments under TILA oversight
The proposed Home Equity Lending Integrity Act would amend the Truth in Lending Act to treat home equity investments as residential mortgage loans and require Consumer Financial Protection Bureau rules for enforcement and civil liability.
HousingWire reports that a U.S. Senate bill would amend the Truth in Lending Act to explicitly classify home equity investments, or HEIs, as residential mortgage loans. The Home Equity Lending Integrity Act would define HEIs in TILA and clarify that these transactions fall under the federal mortgage framework, rather than being handled as investments.
Introduced by Sen. Jeff Merkley, the bill would require HEIs to follow the same federal disclosure and consumer protection requirements that apply to many traditional residential mortgages. It would also direct the Consumer Financial Protection Bureau to issue regulations covering enforcement and civil liability for violations involving HEIs.
Under an HEI, a homeowner receives upfront cash in exchange for a share of future home value, with no monthly payments. The homeowner remains in the property and covers taxes, insurance, and maintenance, with settlement tied to when the home is sold or when the investor’s stake is bought back.
The bill is intended to resolve arguments over whether HEIs are loans or investments by defining them as mortgage-based arrangements secured by a home, with repayment based on property value. HousingWire adds that demand for HEIs has risen as higher borrowing costs have made traditional financing harder for some homeowners, citing Urban Institute data that about 35% of applications for cash-out refin