OLYMPIA – Borrowers entering home equity sharing agreements, in which homeowners sell part of their home equity to an investor, would gain protections against companies trying to take advantage of them, under legislation passed Thursday evening.
SB 5968 would regulate home equity sharing agreements under the Consumer Loan Act and task the Washington Department of Financial Institutions with developing rules for this industry.
Unlike a home equity loan or a cash-out refinance, home equity sharing agreements require a large balloon payment either when the contract ends or when the home is sold, whichever comes first. These agreements are currently unregulated and not included under the Consumer Loan Act.
“For most families, home equity is their largest asset and the main source of intergenerational wealth for the next generation. For such an important issue, we need some oversight and consumer protection safeguards,” said Sen. Derek Stanford (D-Bothell), chair of the Senate Business, Financial Services, Gaming & Trade Committee and the bill’s prime sponsor. “Home equity sharing agreements are often advertised as not being a loan, but when that big payment comes due, selling the family home is usually the only way out.”
SB 5968 now moves to the House for consideration.
