A group of U.S. Senators has launched a probe into a now-defunct real estate company that offered homeowners a chance to "unlock" their equity through a unique sale-lease arrangement, but which an NPR investigation found cost some residents thousands of dollars and sometimes their homes.
This is the latest development in a series of challenges for EasyKnock, which announced its sudden closure earlier this month.
In a letter to EasyKnock on Monday, citing NPR's reporting, senators expressed concern about how these deals have affected homeowners who turned to the company in moments of financial stress. They asked what the closure will mean for people who are still renting homes they sold to the company.
"We are deeply concerned about EasyKnock's lasting impact on vulnerable homeowners, including homeowners with pending residential sale-leaseback agreements with your company, and the extent to which the company will be handling these agreements in the wake of its abrupt closure earlier this month," reads the letter. It was signed by seven lawmakers, all Democrats or Independents, including Sen. Elizabeth Warren, D-Mass., Sen. Richard Blumenthal, D-Conn. and Sen. Bernie Sanders, I-Vt.
EasyKnock did not immediately reply to a request for comment, but in the past company officials said its deals have helped people stabilize their finances.
The Senate probe seeks information about how many homeowners repurchase their homes after entering into a sale-leaseback deal with EasyKnock, and how many have been evicted. Senators are also asking for clarification about why EasyKnock decided to suddenly close its doors on Dec. 5 and what that means for the dozens of homeowners who are currently suing the company.
Lawmakers also want to know what will happen to EasyKnock's current tenants. The company alerted homeowners that their properties would now be managed by NESE Property Management, with no further explanation. Senators have asked the company to clarify its relationship with NESE Property Management, which, records show, shares a P.O. box with EasyKnock.
In an email to NPR, Warren said she's launching the probe as a way of "ringing the alarm so people can be on alert."
The Senate probe is not the first time EasyKnock's sale-leaseback transactions have caught the attention of regulators. Last year, the Massachusetts attorney general signed a settlement in which EasyKnock agreed to cease operations in the state. The Michigan attorney general is currently investigating the company.
In November, the Connecticut attorney general sued EasyKnock alleging the company targeted homeowners looking for mortgage loans with confusing marketing, changed the terms of the deal to the homeowner's detriment and violated state landlord-tenant laws. In a written complaint, the Connecticut Attorney General called EasyKnock's business practices "oppressive, unethical, immoral, and unscrupulous."
EasyKnock also faces more than two dozen lawsuits from homeowners around the country. The company has denied any liability in those lawsuits and investigations and says it is cooperating with attorneys general.
Prentiss Cox, a University of Minnesota law professor who previously ran the consumer protection division at the Minnesota Attorney General's Office, said these actions by state attorneys general – and EasyKnock's closure – are signs that consumer protections are working.
"Enforcement can highlight problems, and if you can eliminate the underlying financing or other support for it, it can solve problems," he said.
But that's only part of the puzzle when it comes to protecting homeowners, said Cox.
Sale-leaseback deals operate in a regulatory gray area. EasyKnock argues that its deals are not bound by a host of state and federal consumer protection laws that apply to traditional mortgages because its transactions are sales, not loans. And EasyKnock is not the only company doing these types of deals. Cox says regulation will be necessary to tackle residential sale-leasebacks more broadly.
"This looks like a problem that's probably going to proliferate with small entities. So when that's the case, I think your only option is to pass laws that make it a technical violation to do what they're doing or bring these transactions within other structures that can be efficiently enforced," said Cox.
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