According to HousingWire, Unison is facing a new class-action lawsuit in North Carolina that challenges the fundamental nature of its home equity sharing agreements. The plaintiffs, who are North Carolina homeowners, argue that Unison's products are actually predatory mortgages disguised as option contracts to avoid state lending regulations. The complaint alleges that Unison systematically misrepresents how its product works and obscures the true costs involved in these agreements.
The financial disparities described in the lawsuit are striking. One couple received about sixty-one thousand dollars in net advances but may now owe nearly two hundred seventy thousand dollars to exit their agreement with Unison. Another plaintiff says the company deducted more than forty-five hundred dollars in fees from an initial payment of nearly seventy thousand dollars. These examples highlight what the plaintiffs contend are deceptive practices that leave homeowners trapped in arrangements far more costly than they initially understood.
The lawsuit specifically accuses Unison of violating North Carolina's high-cost home loan statute by employing practices like balloon payments and negative amortization, all while operating without proper licensing to make mortgages in the state. Additionally, the company allegedly failed to provide required lending disclosures. According to the complaint, Unison records a deed of trust on the home and collects a significant percentage of the home's future value, often fifty percent or more, when the agreement ends.
A recent Ninth Circuit Court of Appeals decision from earlier this year, cited in the complaint, found that Unison's product functioned as a reverse mortgage despite the company's claims that it was simply an option contract. This ruling provides legal precedent suggesting that courts may view these agreements differently than Unison presents them.
The North Carolina case carries broader implications for the entire home equity investment industry, which has faced legal challenges in multiple states. If the court determines that these agreements are actually mortgages, the entire industry could be forced to comply with mortgage lending regulations across the board. This would represent a significant shift in how these products are structured and regulated.
What I am seeing locally in the Bay Area is that homeowners are becoming increasingly cautious about alternative financing products, and rightfully so. Cases like this one remind us that when someone offers a way to tap home equity that sounds simpler or faster than traditional lending, we need to read everything carefully and understand exactly what we're agreeing to. I always tell my clients that if a financial product is hard to understand, that's usually a red flag worth investigating before signing anything.
