(The Center Square) – The new year has begun with bipartisan action in the Pennsylvania House as legislators take on predatory loans for homeowners.
Legislation would move shared appreciation agreements, which allow people to sell a portion of their home’s future equity, under the state’s mortgage laws.
The agreements, also known as home equity sharing agreements, offer homeowners lump sums in exchange for a share of their property’s future value. In a housing market with soaring prices, the arrangements can have great appeal, but their terms can be murky, and they are currently unregulated by the state.
If a home appreciates significantly, the amount required to pay the lender back can lead to huge losses at the time of sale if the borrower eventually moves. Additionally, terms can restrict homeowner’s choices when it comes to home improvements.
Mortgages, on the other hand, are under strict transparency requirements like disclosure requirements, foreclosure protections, and remedies for violations. The shift would create the same safeguards for shared appreciation loans and provide a path for legal recourse for their violation. The state’s usury laws are overseen by the Department of Banking and Securities and the office of the Attorney General.
“It is crucial that homeowners understand the value of their home and how its value will grow in the future,” said Rep. Lindsay Powell, a co-sponsor of the bill and co-chair of the bipartisan Pennsylvania Housing Caucus. “No one should have to struggle due to language that could be intentionally vague. We need greater transparency so that our neighbors know what goes into signing onto an agreement.”
She is joined by her co-chair Rep. Tim Twardzik, R-Frackville, and Rep. Arvind Venkat, D-Pittsburgh.
“Homeowners deserve clear information and honest terms before signing any agreement that affects the future value of their home,” said Twardzik. “This legislation ensures families are not misled by complicated contracts and provides the attorney general with stronger tools to hold bad actors accountable.”
