“This Is Not a Loan.” A Growing Number of Courts Disagree.

Near the top of the contract, in bold capital letters, four words do an enormous amount of work: “THIS IS NOT A LOAN.” The document goes on to call itself an option, an investment, a shared-appreciation agreement, anything but credit.

In exchange for a lump sum today, the homeowner gives up a share of whatever the house is worth years from now, and the company records a lien to secure it. No monthly payments. No stated interest rate. No income check. For a homeowner who is cash-poor but equity-rich, it can look like found money.

A wave of 2026 class actions, two state enforcement actions, and a federal appeals court have all landed on the same rejoinder: whatever the contract calls itself, in substance it is a mortgage.

That single recharacterization, if it holds, pulls an entire product category inside the consumer-lending laws it was designed to sit outside. The exposure is not theoretical. It runs to disclosure violations, licensing violations, usury, rescission, and in some pleadings the unwinding of the deals themselves.

What a home equity investment actually does

Home equity investment products, or HEIs, are sold by fintech firms such as Unison, Hometap, Point, and Unlock, among others. The mechanics are consistent across providers.

The company advances a homeowner a fraction of the home's current value. In return it takes a contractual right to a much larger share of the home's value at the end of a fixed term, commonly ten to thirty years, or earlier if the owner sells, refinances, or dies. The obligation is secured by a deed of trust or mortgage on the property.

The complaints put hard numbers on what that costs. Hometap's own website, quoted in a Pennsylvania complaint, offers this example: on a $500,000 home, the owner receives $50,000, and after ten years of “moderate appreciation” Hometap is owed roughly $137,689, more than two and a half times the cash advanced.

In a New Jersey case, a Hometap customer who took a $103,575 advance faces an estimated payoff between about $177,000 and $199,000. In a Colorado suit, a couple who received roughly $87,000 after fees allege Unison now estimates they could owe as much as $278,618 to terminate the agreement.

None of that is disclosed as an annual percentage rate or laid out in an amortization schedule. As one Minnesota complaint quotes Hometap explaining, “[t]he math is a little complicated.”

The other consistent feature is what the transactions leave out. The pleadings allege the companies do not meaningfully underwrite income, employment, or ability to repay; do not provide the housing counseling that reverse mortgages require; and bury the key financial terms inside long, non-negotiable contracts of adhesion.

A Minnesota filing describes a stack made up of a 33-page option agreement and a separate 14-page mortgage and security agreement, with the financial term sheet tucked into a schedule in the middle and no table of contents.

Many of the agreements also include a “power of sale,” which the plaintiffs say exposes owners who cannot fund the balloon payment to nonjudicial foreclosure.

Why three words carry so much legal weight

The “not a loan” framing is not marketing flourish. It is the load-bearing wall of the entire business model, because loans secured by a home trigger a dense body of law that these contracts are structured to avoid.

Recharacterization is therefore the whole ballgame, and it opens several fronts at once:

• Truth in Lending Act. If an HEI is credit, it owes federal TILA and Regulation Z disclosures, and the statute's bar on mandatory arbitration in residential mortgage loans can knock out the arbitration clauses these contracts rely on.

• State licensing. Mortgage lenders must be licensed. Several complaints allege the providers never registered as mortgage companies or loan originators in the states where they did business.

• Usury caps. Reframed as loans, the implied cost of many HEIs is alleged to blow past state interest-rate ceilings, exposing the lender to usury penalties.

• Reverse-mortgage rules. Because HEIs share the core reverse-mortgage feature of no monthly payments and repayment on a later event, plaintiffs invoke reverse-mortgage counseling, disclosure, and deed-labeling statutes designed for exactly that risk.

Consumer advocates have been building this roadmap for a while. The National Consumer Law Center has catalogued how courts are beginning to treat these products as the credit they resemble, and the argument has now migrated from commentary into filed complaints, state enforcement, and at least one appellate opinion.

One theory, adapted to whatever each state offers

What makes the current wave distinctive is not a single blockbuster case but the way the same core allegation is being repackaged into whatever consumer-protection regime each jurisdiction provides. The complaints cluster around two providers.

The Unison cases

The earliest of the filings, Ahmed v. Unison (Eastern District of New York, filed August 2023), is also the most aggressive, pairing common-law fraud and New York consumer-protection counts with claims under Section 10(b) of the Securities Exchange Act, TILA, and New York banking law, and describing the product as a “speculative option contract in which the homeowner bets against the value of their own home.”

The pace picked up in 2025 and 2026. Gout v. Unison (San Francisco Superior Court, September 2025) and Scroggins v. Unison (San Bernardino Superior Court, November 2025) run on California's Unfair Competition Law and its financial elder-abuse statute.

Kane v. Unison (District of Colorado, April 2026) is pleaded under the Colorado Consumer Credit Code, the state's consumer-protection act, and its mortgage and reverse-mortgage licensing laws.

The anchor of the group, Santaniello v. Unison (District of New Jersey, June 2026), is the most granular on how the numbers are built. It describes one plaintiff whose “original agreed value” of $437,775 was marked down from a $449,000 appraisal by a 2.5% “Risk Adjustment,” shrinking his equity before the deal even began, then a $78,575 initial payment against a 70% investor share and a maximum authorized debt of $303,075 over a 30-year term.

The suit pleads New Jersey's Consumer Fraud Act, its Truth-in-Consumer Contract, Warranty and Notice Act, the Home Ownership Security Act, and the Residential Mortgage Lending Act, plus a civil-conspiracy count tying the affiliated Unison entities together.

The Hometap cases

The Hometap complaints tell the same story in a different register. Greenidge v. Hometap (District of New Jersey, February 2026) opens by placing the product in a lineage of “predatory and abusive” home-lending schemes stretching back to the 2008 crisis, and pleads TILA alongside New Jersey's Home Ownership Security Act and Consumer Fraud Act.

Ruane v. Hometap (Western District of Pennsylvania, May 2026) adds Pennsylvania's usury law and unfair-trade-practices statute.

Stevens v. Hometap, filed in Hennepin County, Minnesota in July 2026 and removed to federal court, is brought under Minnesota's private attorney general statute and leans hard on the contract's own “THIS IS NOT A LOAN” language and its “power of sale” foreclosure mechanism.

Read together, the filings show a theory that travels well.

The federal TILA claim provides a national spine, and each state layers on its own licensing, usury, disclosure, and elder-protection hooks. A defense win in one forum does little to insulate the providers in the next, because the next complaint is pleaded under a different statute.

Regulators and one appeals court got there first

The private bar is not operating in a vacuum. It is building on a run of official actions that supplied both the legal theory and the credibility behind it.

In January 2025 the Consumer Financial Protection Bureau took three coordinated steps: it filed an amicus brief in Roberts v. Unlock arguing that the HEI at issue is a residential mortgage loan because it extends “credit,” issued a consumer advisory warning that owners may owe more than they received even if the home loses value, and published an issue spotlight on the home equity contract market.

Defense-side and consumer-side firms alike read the filings as a significant federal signal that these products sit closer to lending than their drafters intended.

The Bureau's posture has cooled under new leadership since, but it never withdrew the Unlock brief, and the position it staked out, that an HEI can be credit, is now doing work in private litigation regardless of what the CFPB does next.

An appeals court weighed in too, in an episode that shows how hard providers are fighting to keep adverse rulings off the books.

In August 2025, a Ninth Circuit panel held in Olson v. Unison that a home equity agreement met the definition of a reverse mortgage under Washington law, reasoning in a published opinion that an upfront advance coupled with an obligation to make a future payment is “credit” under the term's plain meaning.

Unison petitioned for rehearing en banc. Before that was resolved, the parties stipulated to voluntarily dismiss the appeal, and the panel vacated its own August 2025 opinion, leaving the district court's earlier dismissal in place.

One judge dissented from erasing a decision the court had already issued. The practical effect is that the reasoning no longer binds anyone, yet it survives as a detailed appellate roadmap that plaintiffs keep citing, and the way it vanished, through a settlement that wiped out an unfavorable ruling, tells its own story about the stakes.

Two attorneys general have moved as well. Massachusetts Attorney General Andrea Joy Campbell filed what her office called a nation-leading enforcement action against Hometap in February 2025, alleging its HEIs are illegal, unlicensed reverse mortgages. In December 2025 a Suffolk County judge barred Hometap from arguing that state regulators had blessed its model, and the case is proceeding through discovery.

In June 2026, Colorado Attorney General Phil Weiser announced a settlement with Unlock under which the company agreed its home equity agreements are consumer credit subject to the state's credit code, will obtain licenses before resuming business, and identified $390,783 in restitution owed to 167 Colorado homeowners who paid above the state's rate cap.

Legislatures are the newest entrant. In April 2026 Maine enacted the first state law written specifically for these products, treating shared-appreciation agreements as mortgage loans and requiring enhanced disclosures, housing counseling, and legal representation.

Advocates who backed the bill note that it is strict enough that providers are expected to stop offering the product in the state entirely, a preview of the choice other legislatures may soon force.

Where this is heading

The through-line across every one of these fronts is the gap between what the contracts say and what they do, and that gap is now being tested everywhere at once: in federal and state trial courts, in two attorneys general offices, and in a statehouse.

The plaintiffs' recharacterization roadmap, once a theory in an advisory, has become a well-worn path with a regulatory settlement, a first-in-the-nation statute, and even a vacated-but-still-circulating appeals-court opinion behind it.

For providers, the strategic problem is that the strongest evidence against them is their own paper. The “not a loan” disclaimer, the lien, the appreciation-based payoff, the absence of income underwriting, the power of sale: each feature that made the product attractive to sell is a feature a court can read as credit.

And the litigation is no longer confined to the two most-sued names. As additional providers, securitizers, and even competing lenders are drawn in, the question is shifting from whether an individual contract survives to whether the “not a loan” architecture survives at all.

On that question, 2026 has not been kind to the four words at the top of the page.

Track the HEI disguised-loan wave as it spreads.

Every filed HEI recharacterization case, the providers, jurisdictions, statutes, and firms behind them, plus the enforcement actions and rulings shaping the theory, tracked in one place and updated as the docket moves. Open the trend reports.

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