Establish provisions for homeownership through shared equity agreements.
Summary
HB 1178 creates a new legal framework in Title 11 for “shared equity agreements” as a way to help finance homeownership. Under the bill, an investor-owner can contribute toward a buyer’s down payment and mortgage obligation for an eligible single-family home, and in return receives a recorded shared equity encumbrance against the property. The occupant-owner keeps title and exclusive possession of the home, but the agreement must spell out the parties, property description, contribution percentage, term, default remedies, buyout rights, and how the investor-owner is paid when the agreement ends.
The bill limits these agreements in several ways. The investor contribution cannot exceed 30% of the purchase, the term cannot exceed 15 years unless renewed, and the occupant-owner must obtain a traditional mortgage with a fixed or limited-variable rate for at least the term of the agreement. The agreement cannot run with the land, cannot impose prepayment penalties, cannot block lawful use of the home, and cannot prevent refinancing if the mortgage terms still comply with the bill. The bill also requires the agreement to be recorded with the county register of deeds.
Impact
HB 1178 would add a new chapter to Title 11 governing private shared-equity home financing arrangements and would affect property law, mortgage lending, and real estate recording practices. It establishes enforceable requirements for contract form, termination, appraisal, payout calculations, and release of the encumbrance, while also making clear that the investor’s interest is subordinate to the mortgage and does not bind later bona fide purchasers. The bill also bars use of public housing moneys to finance an eligible home under this private co-ownership structure.
Sentiment
Based on the bill text and the absence of recorded committee testimony or votes, the overall sentiment appears neutral to supportive in intent. The measure is framed as a homeownership access tool, suggesting an effort to expand financing options for buyers who may need help with upfront costs. At the same time, the bill is structured with detailed consumer-protection and lender-protection rules, indicating an attempt to balance assistance with limits on investor control and long-term encumbrances.
Contention
The main points of potential contention are likely to be the investor’s return and the allocation of risk. The bill allows the investor-owner to receive the greater of a percentage of the home’s appraised value or the original contribution plus interest, while also stating that the occupant-owner bears all losses if the home declines in value. That asymmetry could draw concern from consumer advocates, while lenders or housing-finance stakeholders may focus on the requirement for a traditional mortgage, the subordination of the shared-equity interest, and the prohibition on making the agreement run with the land. Another possible issue is the exclusion of public housing funds, which limits how the arrangement can be used.