A San Francisco-based financial technology company is facing a class-action lawsuit that could further upend the burgeoning home equity investment (HEI) industry.
The case, filed in September in the Superior Court of California for the County of San Francisco, alleges that Unison Agreement Corp. uses predatory “equity sharing” contracts to trap homeowners in unlicensed, usurious mortgages disguised as investment partnerships.
The lead plaintiff, 80-year-old retiree Patricia Gout, claims she received a lump sum of $97,256 from Unison in 2017 to help with home maintenance and medical costs. Eight years later, she discovered she owed the company nearly $375,000, equating to an effective interest rate of approximately 34.49%.
“Unison sidesteps safeguards, issuing illegal mortgage loans masquerading as ‘option’ contracts,” the complaint states. “Its complex ‘HomeOwner Agreement’ mortgage poses greater risks than more traditional mortgages, but purports to be exempt from laws regulating mortgage lenders.”
‘Illusory’ patnership
The lawsuit strikes at the heart of the HEI industry, which has grown rapidly by offering homeowners cash in exchange for a share of their home’s future appreciation.
Unlike traditional home equity lenders, HEI providers like Unison market their products as “debt-free” and “interest-free,” claiming they are “partners” who share in both the gains and losses of a home’s value, the suit claims.
The complaint alleges this partnership is “illusory.” It claims Unison uses “sophisticated data infrastructure” to select homes likely to increase in value, while employing “opaque fees” and “convoluted terms” to ensure its own profits at the homeowner’s expense.
“Unison isn’t a partner with homeowners — as its own contract admits in fine print. Instead, it locks them into contracts under which they must pay Unison far more money than they received up front — and, in some cases, forces them to sell their homes to do so,” the suit states.
Thomas Scott-Railton, an associate at Gupta Wessler LLP, one of the law firms representing Gout, told HousingWire that a true partnership doesn’t operate that way.
“Partners, as a legal term, requires obligations like acting in the other person’s best interest and sharing risks and burdens, and these companies don’t do that,” he said.
Unison, which operates in 30 states and Washington D.C., has previously stated that its equity sharing agreements are not loans and are not currently required to be licensed as such. The company did not respond to HousingWire’s request for comment.
The lawsuit argues that these agreements are actually residential reverse mortgages and should be subject to California’s strict consumer protection laws, including interest rate caps and licensing requirements.
“The key legal question in a lot of these cases is whether these products are actually hidden mortgages, generally, and reverse mortgages specifically,” Scott-Railton said. “[The company’s] big fallback is that they claim they’re not making mortgage loans and they’re not issuing reverse mortgages. If these things are actually residential mortgage loans or reverse mortgage loans, there’s no question these companies are violating the law.
“There are all sorts of disclosures that they’re not providing,” he added. “They’re not getting licensed to provide mortgages, they’re including terms that are illegal under federal and state law, they’re not making sure people get independent counseling, and they’re charging interest rates that violate state laws.”
The complaint seeks to protect a proposed class of California homeowners. If successful, it could force the entire HEI industry to restructure as a regulated mortgage product, potentially ending the high-return business model that has attracted billions of dollars from institutional investors.
Litigation in other states
This is not the first legal action of its kind, Scott-Railton said.
“The first decision about this current generation of products is the Olson v. Unison decision out of the Ninth Circuit, which was interpreting Washington state law. The three federal appellate judges unanimously ruled that Unison’s product was a hidden reverse mortgage loan and a residential mortgage loan, and that the company was doing deceptive marketing.”
While Unison settled that case in October 2025, it’s also simultaneously facing a lawsuit from the National Association of Consumer Advocates, which alleges the company deceptively markets its product as a “no-debt” home equity option.
Another HEI provider, Hometap, is also the subject of similar accusations in Massachusetts, where Attorney General Andrea Joy Campbell has argued that the company’s product is an “illegal, deceptive, oppressive and unconscionable mortgage that violates the criminal usury statute.”
Scott-Railton noted that proper regulation exists to protect consumers when getting reverse mortgages, especially after the 2008 financial crisis, which exposed how devastating reverse mortgages could be if misused. The same protections do not yet apply to HEIs.
“Reverse mortgages are not illegal in themselves. When properly regulated, people can use them, and in some cases, they might find some value in them,” he said.
“We created all these regulatory frameworks to try to make sure that if people were using them, it was the kind of people who understood them and might potentially benefit from them, not people who would suddenly, a couple years down the road, realize that they signed up for something that was a mortgage loan on their home, and this huge balloon payment that they didn’t understand and can’t pay off without losing their homes.”
A key element of the business model for HEI companies is that after homeowners commit to contracts, the companies bundle them into securities and sell them to institutional investors. Ratings agencies often evaluate these securities using reverse mortgage criteria, Scott-Railton said, since they are essentially reverse mortgages.
“It doesn’t seem like these companies are necessarily fully disclosing the extent of the legal risk when they’re doing these securitizations,” he added.
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