MANASSAS, Va. — A new study commissioned by the Washington Department of Financial Institutions, conducted by researchers at the University of Washington and Washington State University, offers insight into Home Equity Sharing Agreements (HESAs, which may also be referred to as Shared Equity Products or SEPs). The study examined the role of HESAs in expanding access to home financing, how the products are being implemented, and where clearer oversight could further strengthen transparency and consumer protections. While the study presents many conclusions that have the full support of CHEP and its members, there are findings that we respectfully believe are materially incorrect.
As an industry focused on treating consumers fairly and equitably, the study validated our members’ treatment of Washington homeowners. We are pleased to see that the researchers also found:
- HESAs are not targeting vulnerable homeowners but rather expand access where financing is limited. Based on reviewing data from thousands of contracts, the report found no evidence that providers are targeting financially vulnerable populations and that the products are “geographically widespread.” Further, it noted that “HESAs are designed to offer a more flexible financial product available to a larger share of homeowners,” particularly in circumstances where limited financing options are available or for homeowners who might not qualify for or want to pursue debt-based financing options.
- Providers applied terms fairly to all homeowners. Data from the contracts analyzed supports the conclusion that providers generally offered the same terms to their customers, such as how much cash a homeowner receives upfront and what the investor might receive later, regardless of someone’s credit score, age, or income level.
- Consumer cost protections have become the standard. While product terms vary, the report acknowledges that four major providers have always implemented voluntary caps on investor returns. These cost protections, combined with clear disclosures, are central to CHEP’s consumer-first approach and are already in place across all member offerings.
- Regulatory oversight should evolve with the category. As awareness and adoption of HESAs continues to grow, state-level oversight has an important role to play in ensuring transparency, fairness, and consumer protection. The report supports what CHEP has consistently advocated: States should move swiftly to establish a clear regulatory framework that is compatible with the unique features of the HESA product, including licensing requirements, standardized disclosures, and consumer safeguards that ensure these products remain both accessible and responsibly offered.
In addition to the positive conclusions offered above, it is important to recognize that there are other aspects of the study that our association and its members do not support. A more detailed analysis of our concerns will be forthcoming. As examples, we would like to highlight three areas of contention:
- Originators disclosed all available data. We do not support any inference that our members failed to provide the researchers with “detailed consumer demographics.” As explained to the researchers, HESA providers do not have the legal authority to request information related to consumer demographics, such as race and gender, and, therefore, do not capture such information during the origination process.
- Findings in Part II of the Study – “WA Homeowners’ Experiences with HESA products (N=14)” – are inconclusive. In Part II of the study, the researchers offered multiple conclusions based on homeowners’ self-reported experiences that leave a reader of the study with the impression that these experiences are quantifiable, statistically significant and conclusive. In fact, Part II is based on a sample size of just 14 homeowners. It is statistically insignificant and represents a minimal population of Washington residents who have entered into HESAs. Also, the 14 self-reported homeowner experiences were not independently verified. In fact, researchers noted that this minuscule, unverified sample was not selected using valid randomization standards and, therefore, cannot be considered an accurate representation of homeowner experiences with HESAs in Washington. Thus, we strongly believe the Part II findings to be inconclusive.
- HESA originators are pro-regulation. The study reports that HESA originators have expressed concern regarding the application of incompatible mortgage laws and regulations to HESAs. A reader of the study could be left with the impression that expressing such concern demonstrates that the industry is anti-regulation: Nothing could be further from the truth. CHEP and its members fully support the comprehensive regulation of HESAs in a manner consistent with that afforded to other financial products. CHEP members: 1) want to be regulated by the same regulators that oversee other forms of home finance (i.e., state mortgage regulators); and 2) support bespoke regulation similar in scope and spirit to mortgage loan regulations that would establish comprehensive requirements for licensing, reporting, disclosures, caps on costs and fees, prohibited practices and operational standards. CHEP members have been actively and steadfastly engaged with regulators across the country for the past several years to promote these regulatory goals.
“This study is a welcome first step in what we hope to be ongoing and productive academic studies of HESAs,” said Cliff Andrews, President of the Coalition for Home Equity Partnership. “As the HESA marketplace continues to evolve, we are committed to working with policymakers in Washington and beyond to shape regulatory standards that serve consumers and promote access to these essential financial solutions.”
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ABOUT THE COALITION FOR HOME EQUITY PARTNERSHIP
The Coalition for Home Equity Partnership (CHEP) is a collective of financial services companies that offer flexible ways to tap home equity. The association is dedicated to the protection and promotion of the shared equity product industry with a focus on education, advocacy and marketplace innovation that improves homeowners’ financial lives. For more information, visit homeequitypartnership.org.