Massachusetts Settlement Targets Mortgage-Backed "Homeowner Benefit” Agreements

On March 11, Massachusetts Attorney General Andrea Joy Campbell announced a consent order with a real estate-related lender's subsidiary, and affiliated individuals resolving allegations that the company violated the Massachusetts Consumer Protection Act by deceptively marketing mortgage-backed "Homeowner Benefit Agreements" to financially struggling homeowners.

According to the complaint, the company offered homeowners relatively small upfront cash payments, typically less than $1,500, in exchange for a 40-year exclusive right to act as the listing broker if the homeowner later sold the property. The Attorney General alleged that the agreements also triggered substantial payment obligations upon other transfers, including death or foreclosure, and that the transactions were secured by recorded mortgages that could interfere with refinancing, home-equity access, or the ability to sell the home. The complaint further alleged that the company marketed the product to vulnerable consumers searching for loans or public benefits while obscuring the true nature of the transaction.

The Attorney General alleged that consumers were left unaware that they had encumbered their homes through mortgages tied to the transactions. The Attorney General alleged that the company did not provide documents in advance, used small-font paperwork, and rushed consumers through signing without ensuring they understood the nature of the transaction.

Putting It Into Practice: State regulators remain focused on consumer-facing products and marketing practices that may affect homeowners and other financially vulnerable consumers (previously discussed here). Courts and regulators continue to scrutinize consumer-facing products where marketing, disclosures, or sales practices may obscure the nature of the transaction and take advantage of a consumer's lack of understanding of transaction terms. Companies offering similar products should review their marketing, disclosures, contract terms, and sales practices carefully in light of continued state scrutiny.

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