On July 13, the Maine Bureau of Consumer Credit Protection (BCCP) issued a reminder to consumers regarding existing protections applicable to shared appreciation mortgages (SAMs), also referred to as home equity investments (HEIs). Under such an agreement, a consumer receives an upfront payment in exchange for a share of the home’s future value, repayable later as a lump sum, with payment typically due when the home is sold, the homeowner dies, or the contract ends. The BCCP described SAMs and HEIs as “complex agreements that can lead to significant or unexpected costs” and stated that the lump-sum repayment amount can increase if the home’s value increases. The BCCP stated that Maine consumers are protected by emergency legislation Gov. Janet Mills signed on April 13, which defines a SAM or HEI loan as a mortgage loan rather than an investment contract and amends the state’s consumer credit code to classify such a loan as a consumer loan and residential mortgage loan subject to the code’s licensing and disclosure requirements, while directing the BCCP to enforce those provisions.

Among other requirements, the law bars such loans from containing confidentiality provisions, mandatory arbitration clauses, or terms permitting a lender to unilaterally extend the loan without the borrower’s written consent, and it requires lenders to provide borrowers with at least 90 days’ advance written notice of any action required of the borrower that could affect their rights. The law also requires borrower counseling and a three-day right of rescission before a loan agreement is finalized, and it presumes a loan to be unconscionable or the result of an unfair or deceptive trade practice if the borrower was not represented by independent counsel during the transaction. The BCCP stated that Maine residents considering such agreements should compare them to alternatives, including home equity loans, home equity lines of credit, and state and local assistance programs.