Home Equity “Investment” (HEI) Loans are a relatively new financial product secured by a homeowner’s primary residence. At heart, they are very expensive mortgages with confusing and overly complicated terms. HEI lenders try to evade consumer protections by falsely claiming that their product is not a loan. Courts and lawmakers who have looked at HEI loans, however, reject that assertion.
These model clauses are designed to address problems that homeowners have experienced with the nascent HEI Loan market and to clarify that these products are in fact loans subject to state lending laws and regulations. By adopting them now, before predatory practices become more widespread, states will be able to avoid a repeat of past market failures, like the subprime mortgage crisis.
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