Shared Appreciation Agreements, also sometimes called Home Equity Sharing Agreements, allow homeowners to receive a lump sum of money by selling a percentage of their home equity. These agreements neither accrue interest nor have principal payments and therefore are not regulated as mortgages. Instead, the issuing entities receive a percentage of the home’s future value, unless the homeowner buys back their share of the home. These contracts can be complex, often require large balloon payments at the end of the contract term, and may impose limits on renovations, renting the property, or obtaining additional financing. Currently, there are no statutes in the Commonwealth that regulate Shared Appreciation Agreements.
 
To provide transparency to and protect homeowners when entering Shared Appreciation Agreements, we are proposing legislation to amend the Loan Interest and Protection Law (Act 6) to ensure that these agreements are included under Pennsylvania’s residential mortgage protections (attached). 
 
Since Act 6 predates Shared Appreciation Agreements, current law does not expressly define or regulate them.  This creates uncertainty for homeowners and allows companies that market these products to avoid the consumer protection framework that applies to residential mortgages.  Our legislation will close this gap by clarifying that the term residential mortgage includes Shared Appreciation Agreements.  By including these agreements under Act 6, passage of this legislation will grant homeowners the same statutory safeguards that apply to other home-secured financial products.  These include disclosure requirements, foreclosure protections, and remedies for violations.  As products related to sales of home equity expand, it is essential that our laws keep pace.
 
Please join us in co-sponsoring this important legislation to provide Pennsylvanians with the protection and transparency they deserve when considering selling equity in what is commonly their most valuable financial asset, their home.