Homeowners in the U.S. hold around $34 trillion in home equity. In a new article for New America’s Rooftop Blog, Alys Cohen, Director of Federal Housing Advocacy and Acting Co-Director of Federal Advocacy, notes that many plan to use this equity, the single largest source of family wealth, to fund retirement, pay for long-term care, make home repairs, help children with education costs, or as an inheritance for future generations. For decades, homeowners have borrowed against this accrued equity primarily through regulated financial products such as home equity lines of credit (HELOCs) and reverse mortgages, but a new business model has emerged that undermines homeownership as a path to financial and housing stability.
Home Equity Investment (HEI) loans are home-secured mortgage loan products offered by private companies to existing homeowners, including those who are cash and credit-constrained and cannot qualify for traditional loans to cover major life expenses. HEI loans provide the homeowner a cash advance in exchange for a share of the home’s future value. And while HEI loans are marketed as a flexible option for underserved homeowners, the reality is that these products transfer wealth from homeowners and their families to institutional investors, and can result in financial ruin for the homeowner.
Support NCLC
Please support NCLC's work to advance consumer rights and economic justice with a tax-deductible contribution today!
Donate