Mortgages – Chapter 93A – Marketing

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Where the commonwealth has alleged deceptive marketing in connection with the defendant’s product, the “Home Equity Investment” (HEI), the defendant’s motion to dismiss should be denied because questions of deception and causation are ones that must be developed in discovery.

“The Commonwealth of Massachusetts has brought five claims of unfair and deceptive acts and practices under G.L.c. 93A, §2 against Hometap Equity Partners, LLC and Hometap Management Holdings, LLC (together Hometap) in connection with Hometap’s product, the Home Equity Investment (HEI). The Commonwealth alleges the HEI is an illegal mortgage loan (Count I), violates the criminal usury statute (Count II), has been marketed deceptively (Count III), was unaccompanied by required state and federal loan disclosures (Count IV), and is an unfair, oppressive or otherwise unconscionable product (Count V). The Commonwealth seeks a declaration that all HEI contracts with Massachusetts consumers are unlawful mortgage loans and subject to the criminal usury statute, a permanent injunction barring further violations of G.L.c. 93A, reformation of the HEIs in the Commonwealth, an order requiring Hometap to pay restitution, and an award of civil penalties and costs.

“Hometap moves to dismiss the Complaint pursuant to Mass. R. Civ. P. 12(b)(6). Hometap argues that three of the Commonwealth’s counts are based on the incorrect premise that the HEI is a loan when, according to Hometap, the HEI is an option contract (Counts I, II, and IV). As to the remaining counts, Hometap argues the Commonwealth has not alleged facts that plausibly suggest the HEI is unfair or unconscionable (Count V) or that the HEIs have been marketed deceptively (Count III). …

“Counts I, II, and IV all allege violations of G.L.c. 93A based on the illegal provision of unlawful mortgage loans. Count I alleges that HEIs are illegal reverse mortgage and high-cost mortgage home loans that do not comply with Massachusetts law. Count II alleges the HEIs are usurious loans that violate G.L.c. 271, §49. And Count IV alleges deceptive marketing related to the provision of loans. Hometap argues that Counts I, II, and IV must be dismissed because they are all based on the incorrect premise that the HEI is a loan. …

“Assuming the facts asserted in the Complaint are true, as I must, the Commonwealth has sufficiently alleged that HEIs are, in substance, loans. …

“At the end of the day, the Commonwealth’s allegations, if true — that Hometap pays money to homeowners who are subject to foreclosure and a forced sale if they fail to repay Hometap approximately two times Hometap’s investment — would support the conclusion that the transaction at issue is not an option but a loan. At this stage of the litigation, it is premature to conclude one way or the other, but the Commonwealth has alleged facts which plausibly suggest the HEIs are loans and thus violate G.L.c. 93A because they are illegal mortgage loans (Count I), violate the criminal usury statute (Count II), and violate required state and federal loan disclosures (Count IV). …

“For all the above reasons, the Motion to Dismiss Counts I, II, and IV must be denied. …

“Count III alleges deceptive marketing in connection with the HEI. The Commonwealth alleges that Hometap’s marketing and sales communications would lead consumer to believe that Hometap’s returns stem from the Hometap fee and from home price appreciation when, in actuality, Hometap’s return comes from devaluing the homeowner’s equity and purchasing it at below market value. In support of its motion, Hometap argues that the Hometap marketing graphic included in the Complaint discloses all the facts from which a reasonable consumer could understand that, at settlement, for a $100,000 payment, Hometap would be entitled to fifteen to twenty percent of the home’s value which, in the footnote, is disclosed as home worth $1 million. Further, Hometap argues that the Option Agreement and Investment Term Sheet fully disclose the structure of the HEI and explain in detail how the Hometap Share would be calculated. As a matter of law, then, Hometap argues the marketing could not be deceptive.

“This is a closer question. … Here, the ultimate price of the HEI is certainly material, and the Commonwealth has alleged that Hometap’s marketing would mislead an objective homeowner as to the ultimate price he or she would have to pay or face foreclosure or a forced sale. Hometap argues that the Commonwealth’s other alleged misleading material — related to third party costs, successive HEIs, and the renovation adjustment — are insufficient either because the disclosures or lack of disclosures were not material or because all were disclosed. After careful review of the Complaint, the questions of deception and causation are ones that must be developed in discovery, as the ‘analysis of what constitutes an unfair or deceptive act or practice requires a case-by-case analysis … and is neither dependent on traditional concepts nor limited by preexisting rights or remedies.’ …

“For all the above reasons, the Motion to Dismiss Count III must be denied. …

“Count V alleges that the HEI is an unfair, oppressive or otherwise unconscionable product. The claim is based primarily on the structure, as described above, and the allegation that Hometap markets to financially vulnerable consumers who are in debt and cannot qualify for traditional loans, without any investigation regarding whether those homeowners can settle the HEI. The Commonwealth asserts that conduct — whether or not an HEI is a loan — falls within the penumbra of unfairness protected by Chapter 93A.

“Hometap argues that the Commonwealth cannot rely on mortgage lending regulations or the usury statute to allege unfairness because the HEIs cannot and should not be measured against regulations that govern loans. According to Hometap, it is not ‘logical to hold an equity product to the cost limitations of debt products because equity costs more than debt in the market because the equity investor takes on more risk’ and ‘applying the usury limitation to an equity-based product is novel.’ … I am not persuaded. …

“It is not inappropriate to measure the HEI against statutes and regulations protecting homeowner mortgagees or other consumer borrowers. …

“Here, Hometap concedes that it created a new option for homeowners seeking to access their home’s equity. It also concedes that the product is currently unregulated. Therefore, it is not impermissible when considering whether the HEI is unfair or oppressive to consider the guardrails that are in place to protect homeowners who seek to access their equity through traditional or reverse mortgages, as well as the harms those provisions seek to prevent and remedy.

“The Commonwealth alleges that the HEI is unconscionably expensive because it provides Hometap a right to a home equity share worth more than twice what it paid the homeowner. … Those allegations support the claim that the HEI violates Chapter 93A.”

Commonwealth v. Hometap Equity Partners, LLC, et al. (Lawyers Weekly No. 09-128-25) (21 pages) (Squires-Lee, J.) (Suffolk Superior Court) (Civil Action No. 2584CV00469-BLS2) (August 2025).

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