A Commerce City woman who signed a cash-advance deal with her home as collateral is now the face of a class-action lawsuit accusing one of the country's largest home equity agreement providers of disguising high-cost loans as equity investments. Sheila Johnsen signed her agreement with Unlock in 2023, taking $65,400 in exchange for a stake in her home's future value — and according to the lawsuit, she and her husband, Adam, could end up owing more than a quarter of that home's value when the bill comes due.
A Denver Couple's Contract Becomes a Test Case
The $65,400 Unlock extended to the Johnsens represented 12.6% of their home's value back in 2023. Under the terms of the agreement, the couple will owe 25.78% of the home's value when the balloon payment matures in 10 years, according to the lawsuit, filed October 1 in Adams County District Court by the firms HPM and Towards Justice on behalf of Colorado homeowners. The suit names Unlock Partnership Solutions Inc. and its parent, Unlock Technologies, as defendants, and it comes as part of a legal and regulatory reckoning the industry is only now beginning to face, as first detailed by The Denver Post.
Towards Justice, the Denver-based nonprofit serving as co-counsel, was founded in 2014 and has built its practice around impact litigation challenging corporate exploitation and advancing economic justice across Colorado, according to Law Week Colorado. Eric Halperin, representing the plaintiffs, said in a statement that the lawsuit seeks to protect Colorado families' most important investment and end illegal practices that take their equity.
How the Agreements Work — and Why Homeowners Signed Them
Unlock has extended equity advances to hundreds of Colorado homeowners through agreements that require no monthly payments, a feature the company markets as a selling point over traditional loans. Customers typically agree to repay roughly double their current-equity share of the future home value when the home sells or after 10 years passes. One example laid out in the lawsuit shows a homeowner who takes a 15% equity advance in 2026 owing repayment of 30% of the home's value by 2036.
Unlock also takes a deed of trust on customers' homes and requires homeowners to make repairs needed to maintain the property's value, per the lawsuit. The company adds fees to the agreements and, the suit alleges, often appraises homes below their actual market value by applying a risk discount — a practice plaintiffs say shifts nearly all potential downside risk and cost onto consumers.
The Real Cost Behind the No-Interest Pitch
Unlock and other home equity agreement providers argue they are taking an equity stake with an uncertain payout rather than extending a loan with guaranteed principal repayment — the central legal distinction the industry relies on to avoid traditional lending rules. HEA contracts carry no stated interest rate, credit agencies receive no reports about the agreements, and applicants are not required to meet debt-to-income ratios, all of which allows providers to sidestep standard mortgage disclosures and underwriting checks.
But the lawsuit argues that the real cost of capital tells a different story: these agreements would cost about 7.2% per year over 10 years even if home values never increase, and the implied cost of capital can reach 20% to 30% annually once normal home appreciation and added costs are factored in. Colorado law caps interest rates on unsupervised consumer loans at 12% to 21%, figures the suit says Unlock's effective costs blow past. The lawsuit alleges Unlock's product is, in substance, a mortgage loan dressed up as a home equity agreement specifically to evade federal and state consumer protections.
State Regulators Already Took Action This Year
The lawsuit arrives months after Colorado's attorney general reached his own conclusion about Unlock's business. In June, the Colorado Attorney General's Office determined that Unlock's home equity agreements are consumer credit transactions under state law, requiring the company to comply with the Uniform Consumer Credit Code and the Colorado Consumer Equity Protection Act, according to the Colorado Attorney General's Office. As part of that resolution, Unlock Partnership Solutions agreed to pay $283,375 in restitution to 125 Colorado homeowners on prior agreements.
Federal regulators have reached similar conclusions. In January 2025, the Consumer Financial Protection Bureau filed an amicus brief in a New Jersey federal lawsuit against Unlock, arguing that its home equity agreements meet the statutory definition of residential mortgage loans under the Truth in Lending Act because they grant consumers a right to defer payment of a debt, per reporting from Mayer Brown LLP. States including Connecticut, Maryland, and Washington had already enacted statutory changes or regulations explicitly defining home equity contracts as residential mortgage loans subject to state lending oversight, according to the Consumer Finance Monitor.
Wall Street's Role and the Risks Regulators Flagged
Part of what has drawn regulatory scrutiny is how these contracts move beyond the original homeowner's agreement. Unlock packages and sells home equity agreements as securitized debt instruments on Wall Street, a practice the company has used before: in September 2022, Unlock and real estate investment firm Saluda Grade completed a $180 million private-label securitization deal backed entirely by Unlock-originated home equity agreements, including $144 million in senior Class A notes, according to HousingWire. The company's growth has been well-funded — Unlock Technologies secured a $30 million Series B equity investment and a $250 million capital commitment from D2 Asset Management in September 2024 to support its agreement origination growth, per Sidley Austin LLP.
A January 2025 CFPB consumer advisory warned that home equity contracts often feature nonstandard disclosures, lack standardized valuation formulas, skip ability-to-repay evaluations, and can force homeowners into selling their homes when large lump-sum balloon payments come due. The bureau's review of securitizations also found that the median home equity contract customer was in their 50s at signing, and roughly 90% or more had pre-existing primary mortgages taking senior lien positions, according to the same report cited by ALTA — a profile that leaves little room for additional borrowing capacity if a balloon payment forces a sale.
Consumer advocates argue that an inability to repay a home equity agreement could push some homeowners into foreclosure and put the broader housing market at risk. The two firms behind the Colorado case argue Unlock's alleged practices expose hundreds of Coloradans to ballooning payments, lost home equity, and restrictions on how they use their own homes, according to the lawsuit.
Part of a Wider Industry Reckoning
The Adams County case is not an isolated legal action. Legal challenges against shared-equity providers have spread nationally, with major competitor Unison facing class-action litigation in North Carolina in September 2026 alleging deceptive loan practices, HousingWire reports. Four major home equity contract providers securitized approximately $1.1 billion backed by roughly 11,000 contracts in just the first ten months of 2024, within an estimated total HEA market of $2 billion to $3 billion, according to the CFPB's market spotlight — underscoring how quickly these products have scaled even as regulators and courts increasingly question whether they comply with the same lending laws that govern conventional mortgages.
