Legal Developments in Home Equity Agreements Warehouse Lending and Whole Loan Purchases: State of the Non-QM Market FALL 2026
STRUCTURED FINANCE SPECTRUM, FALL 2026 | 1 Editor’s Note As we head into the final months of the year, deal activity across the structured finance market remains steady, even as economic and regulatory uncertainties persist. In the residential and nonagency sectors in particular, lenders and issuers continue to bring transactions to market while adjusting facility terms and underwriting standards to meet evolving legal requirements and heightened credit scrutiny. The articles in the fall 2026 Structured Finance Spectrum reflect this dynamic market environment. We begin with the rapidly shifting legal and regulatory terrain surrounding home equity agreements (HEAs). As the HEA warehouse and securitization markets expand, these products face ongoing scrutiny over their fundamental classification as either consumer loans or equity investments. The piece breaks down recent federal activity, including the CFPB’s amicus brief in Roberts v. Unlock and the proposed Home Equity Lending Integrity Act, alongside state legislative updates and judicial rulings across the country. These developments create new TILA and RESPA compliance questions, potential assignee liability, and putback considerations that deal participants must carefully manage. Our second article examines the non-QM mortgage market, where record breaking non-QM RMBS issuance, surpassing the 2025 record to reach $82 billion through August, has driven parallel increases in warehouse lending and whole-loan purchase volumes. With originations surging toward the $150 billion to $180 billion range and a highly fragmented originator base, warehouse lenders face an evolving commercial landscape. The article explores the rise of nonrecourse and limited mark-to-market facilities with multiyear tenors, emphasizing the importance of bespoke repo structuring, repurchase safe harbors under Bankruptcy Code Section 559, and risk-adjusted pricing in the face of expanding private credit participation. As always, we hope this edition of Structured Finance Spectrum provides valuable insights into the developments shaping our industry. We look forward to continuing the conversation in the months ahead and reconnecting with many of you at ABS East in Miami!. Steve Blevit Partner, Finance Chris Juarez Senior Associate, Finance Tara Castillo Partner, Moderator Aimee Cummo Partner, Panelist We look forward to seeing you at ABS East! Come hear from our team while you’re in Miami. No Place Like Home: SFR and the Build-to-Rent Housing Economy TUESDAY, OCTOBER 20 3:15 – 4:00 PM Coral 2 Don’t Go Chasing Waterfalls: Personal Loans, BNPL and the Unsecured Consumer Hierarchy TUESDAY, OCTOBER 20 11:00 – 11:45 AM Coral 3
STRUCTURED FINANCE SPECTRUM, FALL 2026 | 3 Legal Developments in Home Equity Agreements By: Aimee Cummo, Partner, Finance Jacob Walpert, Senior Associate, Finance Home equity agreements (HEAs), also known as home equity investments, continue to spur new legal and regulatory developments at the intersection of consumer lending, mortgage regulation, and structured finance. Under HEA arrangements, homeowners receive one-time, upfront cash payments in exchange for a future payment, due upon a sale, refinance, or the end of a fixed term, that is based in part on the home’s value. Although the market for HEAs remains relatively small compared to other established home equity lending products, new regulatory, legislative, and judicial developments in recent years continue to shape the industry. A key question concerns classification: Should HEAs be characterized as loans subject to the existing mortgagelending laws and regulatory frameworks, or are they a distinct product requiring its own regulation? HEA providers have generally asserted the latter, characterizing the product as an equity investment or option contract rather than a debt. Consumer groups, state representatives and attorneys general, and some courts have often rejected that characterization, instead contending that HEAs substantively function as high-cost mortgage loans regardless of the label. Federal Activity In January 2025, the Consumer Financial Protection Bureau (CFPB) engaged directly with HEAs by filing an amicus brief in Roberts v. Unlock Partnership Solutions AOI Inc. in the District of New Jersey, arguing that the product at issue satisfied the statutory definition of “credit” under the Truth in Lending Act (TILA) and did not qualify for the Regulation Z investment plan exemption. At the same time, the CFPB issued a consumer advisory warning that home equity contracts can be confusing to consumers and more expensive than initially contemplated, and it published a report documenting significant market growth and identifying product features that it linked to pre-2008 lending practices. Though the CFPB’s activities in this space were not binding and the regulatory role of the CFPB has since become uncertain, these actions signaled to the market that HEAs may need closer regulatory consideration. This year, the Home Equity Lending Integrity Act, which seeks to classify home HEAs as residential mortgage loans, was introduced in the U.S. Senate. The proposal remains at an early stage and is far from enactment, but it is nonetheless notable because it shows intent by some federal lawmakers to subject HEAs to some federal laws that already exist for mortgage loans. State Legislation States have generally been at the forefront of HEA regulation in the absence of significant federal efforts. Connecticut. Effective October 2025, Connecticut requires HEA providers to deliver disclosures within three business days of application covering consumer warnings, deal terms, valuation methodology, and repayment scenarios. Illinois. Illinois amended its Residential Mortgage License Act to bring “shared appreciation agreements” within its mortgage-lending statutory scheme, and the Illinois Department of Financial and Professional Regulation adopted regulations in June 2026 that imposed licensing, disclosure, counseling, and ability-to-repay requirements. Maine. Effective April 2026, Maine classifies shared appreciation mortgage loans under the Maine Consumer Credit Code and imposes a regulatory framework targeting lump-sum repayment features and forced-sale risk. Washington. Washington introduced a bill that would require HEA originators to obtain licenses and subject them to more rigorous oversight within the state. Pennsylvania. In June 2026, Pennsylvania advanced a bill that would create licensing, oversight, and compliance requirements for shared-equity providers administered by the state’s Department of Banking and Securities. States have generally been at the forefront of HEA regulation in the absence of significant federal efforts. Judicial Rulings Judicial activity has generally favored treating HEAs as regulated lending products. In Olson v. Unison Agreement Corp., the Ninth Circuit in August 2025 reversed a district court’s dismissal, holding that Unison’s HEA product met the definition of a reverse mortgage under Washington law, rejecting the company’s argument that the product was an exempt “option contract.” In a substance-over-form analysis, the court concluded that the product constituted “credit” in its plain and ordinary meaning because it was an initial advance of funds together with an obligation to make a future payment. In Colorado, a bankruptcy court allowed claims to proceed past the pleading stage under Colorado consumer protection and bankruptcy law, including unconscionability claims and rejection of HEA contracts as executory contracts. In Weingot v. Unison Agreement Corp., the Eastern District of New York in September 2025 largely adopted a magistrate judge’s recommendation granting the HEA provider summary judgment in part but allowing a homeowner’s claims to proceed toward trial based on disputed facts about how the product was marketed. Multiple other class actions have also been filed against Unison in several states and Washington, D.C., with plaintiffs alleging that the company is deceptive in marketing its
STRUCTURED FINANCE SPECTRUM, FALL 2026 | 5 products as “no debt” and “no interest.” Because HEAs are still a relatively new product and unfamiliar to courts, plaintiffs’ claims regarding consumer credit, mortgage lending and reverse mortgage laws, and deceptive practices continue to play out in courts at both the state and federal levels. State Enforcement A recent enforcement action is Commonwealth v. Hometap Equity Partners LLC in Suffolk County Superior Court, filed in February 2025 by the Massachusetts attorney general, who alleged that Hometap’s HEAs operated as illegal reverse mortgages that failed to comply with state consumer protections covering age restrictions, cancellation periods, and counseling requirements, while also charging interest rates that in effect violated state usury limits. In August 2025, the court denied Hometap’s motion to dismiss, finding its argument that the agreements were not mortgage loans unpersuasive. The court has also barred Hometap from asserting at trial that state regulators had previously approved of its business model. The procedural aspects of this litigation continue, and the case remains closely watched by industry participants. More recently in August 2026, Unlock agreed to a settlement with the Minnesota attorney general, who had alleged violations of the state’s mortgage lending and deceptive trade practices laws. Although denying the allegations, Unlock said it settled to avoid litigation and because it would no longer be offering HEAs in Minnesota. Market Implications For structured finance market participants, the regulatory and litigation risk profile of HEAs continues to evolve. The classification question directly affects whether HEAs trigger disclosures under the Truth in Lending Act, compliance with the Real Estate Settlement Procedures Act, usury laws, and state mortgage-licensing obligations. By extension, this uncertainty also affects whether securitization sponsors face assignee liability exposure, disclosure complications, and potential put-back risk if underlying HEAs are reclassified as mortgage loans. The stakes are notable given the significant expansion in HEA securitization and warehouse volume in recent years. Stakeholders should continue to monitor new developments in how lawmakers, state attorneys general, and the courts treat HEAs. Warehouse Lending and Whole-Loan Purchases: State of the Non-QM Market By: Jon Ruiss, Partner, Finance Mark LoBiondo, Senior Associate, Finance Non-qualified-mortgage (QM) residential mortgage-backed securities (RMBS) issuance reached $82 billion through August 2026, already surpassing the 2025 record, according to Bank of America Securities. This record-breaking year illustrates how non-QM mortgages have become a substantial component of the non-agency RMBS market. It follows that warehouse lending and whole-loan purchase levels for non-QM loans have increased due to the rise in non-QM RMBS issuance because both of those mechanisms are vital to greasing the wheels of the securitization market. Warehouse lenders that realize their unique position in the current market stand to reap the benefit of today’s securitization trends. The focus on non-QM mortgage finance matters as originations surge toward the $150 billion to $180 billion range. The originator base also remains fragmented, heavily populated by smaller non-QM lenders, presenting new opportunities for warehouse lenders. Warehouse lenders that establish the right mix of advance rates, pricing spreads, eligibility criteria, representations and warranties, repurchase obligations, margin mechanics, and takeout timing will be well positioned to capitalize on those opportunities when they arise. Warehouse facilities are the engine of the non-QM originate-to-securitize model. Warehouse facilities are the engine of the non-QM originate-to-securitize model. Typically, when done through a bespoke master repurchase agreement (or repo), the form is deliberate, not cosmetic. It is intended to bring the facility
within the Bankruptcy Code’s repurchase safe harbor under Section 559, permitting the warehouse lender to liquidate collateral following a seller bankruptcy without being subject to an automatic stay. That characterization, together with carefully negotiated eligibility, valuation, margin, and control provisions, is central to the warehouse lender’s credit protection. Commercial terms determine how much capacity an originator can deploy and how quickly aging product on a warehouse line can be taken out. Banks will offer higher advance rates, lower spreads, and higher aging limits to originators and aggregators with a demonstrated history of success and capitalization. However, as the market remains fragmented, larger acquirers are uniquely leveraged to command friendlier economic terms from their bank counterparts. Specifically, nonrecourse, non-mark-to-market or limited mark-to-market facilities with multiyear tenors are on the rise as these outfits acquire greater market clout. And as more private credit companies enter the warehouse lending space, the more non-standard economic terms become standard. Private credit companies are filling the gap that banks cannot. Private credit companies are filling the gap that banks cannot. Warehouse lenders should be fully informed about the risks and pitfalls of the more borrower-friendly economic environment. Whether the lender is a private credit company or a regulated bank, the risks remain the same. Warehouse lenders of all varieties should consider pricing these risks into their term sheets as more non-QM opportunities arise. Steve Blevit Partner, Finance Guest Editor Chris Juarez Senior Associate, Finance Guest Editor Contributing Authors Jon Ruiss Partner, Finance Mark LoBiondo Senior Associate, Finance Jacob Walpert Senior Associate, Finance Aimee Cummo Partner, Finance
STRUCTURED FINANCE SPECTRUM, FALL 2026 | 9 Finance Steve Blevit Partner +1 310 228 3863 stephen.blevit@alston.com Tara Castillo Partner +1 202 239 3351 tara.castillo@alston.com Shanell Cramer Partner +1 212 210 9580 shanell.cramer@alston.com Aimee Cummo Partner +1 212 210 9428 aimee.cummo@alston.com Anna French Partner +1 212 210 9555 anna.french@alston.com Steven Krivinskas Partner +44 20 8161 4425 steven.krivinskas@alston.com B.K. Lee Partner +1 212 905 9138 bklee@alston.com Katrina Llanes Partner +1 212 210 9563 katrina.llanes@alston.com Structured & Warehouse Finance Multipractice Team Marcus Lovatt Partner +44 20 8161 4418 marcus.lovatt@alston.com Joe McKernan Partner +1 212 210 9476 joseph.mckernan@alston.com Jon Ruiss Partner +1 202 210 9508 jon.ruiss@alston.com Pat Sargent Partner +1 214 922 3502 patrick.sargent@alston.com Kristen Truver Partner +1 212 210 9567 kristen.truver@alston.com Robin Boucard Counsel +1 212 210 9454 robin.boucard@alston.com Valerie Clark Counsel +1 212 905 9152 valerie.clark@alston.com Derek Marks Counsel +1 202 239 3046 derek.marks@alston.com Emily Redmerski Counsel +1 212 210 9589 emily.redmerski@alston.com Structured & Warehouse Finance Multipractice Team Susan Thurman Counsel +1 202 239 3119 susan.thurman@alston.com Eva Valik Counsel +1 212 905 9093 eva.valik@alston.com Karen Wade Counsel +1 214 922 3510 karen.wade@alston.com Carly Bennett Senior Associate +1 212 210 9597 carly.bennett@alston.com Emma-Louise Charnock Senior Associate +44 20 8161 4346 emma-louise.charnock@alston.com Brenna Dorgan Senior Associate +1 212 210 9439 brenna.dorgan@alston.com Thomas Dunn Senior Associate +44 20 8161 4373 thomas.dunn@alston.com Donald Gallino Senior Associate +1 212 905 9034 donald.gallino@alston.com Chris Juarez Senior Associate +1 213 576 1095 chris.juarez@alston.com Ashley Kennedy Senior Associate +1 212 210 9516 ashley.kennedy@alston.com Lindsay Klein Senior Associate +1 212 210 9513 lindsay.klein@alston.com Patrick Lightbown Senior Associate +44 20 8161 4421 patrick.lightbown@alston.com Mark LoBiondo Senior Associate +1 212 210 9455 mark.lobiondo@alston.com Sarah McClellan Senior Associate +1 212 210 9557 sarah.mcclellan@alston.com Krishna Pathak Senior Associate +1 202 239 3638 krishna.pathak@alston.com Jacob Walpert Senior Associate +1 212 210 9489 jacob.walpert@alston.com Aryeh Wolosow Senior Associate +1 212 210 9599 aryeh.wolosow@alston.com Jaime Turcios Zacarias Senior Associate +1 212 210 9406 jaime.turcioszacarias@alston.com
STRUCTURED FINANCE SPECTRUM, FALL 2026 | 11 John Adinolfi Associate +1 212 905 9357 john.adinolfi@alston.com Nino Aspanadze Associate +1 212 905 9358 nino.aspanadze@alston.com Lydia Balestra Associate +1 212 905 9073 lydia.balestra@alston.com Chandler Culwell Associate +1 202 239 3128 chandler.culwell@alston.com Jonathan Fenster Associate +1 212 905 9077 jonathan.fenster@alston.com Jacob Koenigson Associate +1 212 905 9192 jacob.koenigson@alston.com Ann Lee Associate +1 212 905 9370 ann.lee@alston.com Rob Lorentzen Associate +1 202 239 3478 rob.lorentzen@alston.com Anissa Malik Associate +1 212 210 9468 anissa.malik@alston.com Michael McEvoy Associate +1 212 905 9080 michael.mcevoy@alston.com Kirby Shilling Associate +1 212 210 9488 kirby.shilling@alston.com Financial Restructuring & Reorganization Peter Amend Partner +1 212 905 9166 peter.amend@alston.com Stephen Blank Partner +1 212 210 9472 stephen.blank@alston.com William Hao Partner +1 212 210 9417 william.hao@alston.com Jacob Johnson Partner +1 404 881 7282 jacob.johnson@alston.com Leah McNeill Partner +1 404 881 7822 leah.mcneill@alston.com Structured & Warehouse Finance Multipractice Team Anna Nolan Partner +44 20 8161 4370 anna.nolan@alston.com Will Sugden Partner +1 404 881 4778 will.sugden@alston.com Phillip Taylor Partner +44 20 8161 4365 phillip.taylor@alston.com Consumer Regulatory Anoush Garakani Partner +1 213 576 1181 anoush.garakani@alston.com Steve Ornstein Partner +1 202 239 3844 stephen.ornstein@alston.com Nanci Weissgold Partner +1 202 239 3189 nanci.weissgold@alston.com Morey Barnes Yost Counsel +1 202 239 3674 morey.barnesyost@alston.com Josh Dhyani Senior Associate +1 202 239 3160 josh.dhyani@alston.com Bank Regulatory Cliff Stanford Partner +1 404 881 7833 cliff.stanford@alston.com Tax John Baron Partner +1 704 444 1434 john.baron@alston.com Kendall Houghton Partner +1 202 239 3673 kendall.houghton@alston.com Clay Littlefield Partner +1 704 444 1440 clay.littlefield@alston.com Andi Mandell Partner +1 212 905 9374 andi.mandell@alston.com Ashley Menser Partner +1 919 862 2209 ashley.menser@alston.com Satvi Vepa Partner + 44 20 8161 4427 satvi.vepa@alston.com Structured & Warehouse Finance Multipractice Team
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