Lenders get a tax break on home equity gains—borrowers don't

What it does

This bill excludes from federal income tax any gains that lenders receive from shared appreciation mortgages (SAMs)—second mortgages where the lender shares in home appreciation—when the borrower's income was below 140% of area median income and the property was their primary residence. It also exempts gains from selling assets composed of or secured by such mortgages. The tax break applies retroactively to amounts received after December 31, 2025.

Why we flagged it

The bill's operative mechanism is a federal income tax exclusion for lenders' gains on shared appreciation mortgages. While framed as expanding homeownership access, the tax benefit runs directly to lenders, not borrowers, and is structured as a narrow industry incentive rather than a broad homeownership or affordability measure.

What the text implies

• The tax exclusion benefits lenders regardless of whether they reduce borrowing costs for homebuyers; there is no requirement that the tax savings be passed to borrowers, creating a pure lender subsidy.
• Shared appreciation mortgages require borrowers to surrender a percentage of home equity gains to the lender; the tax incentive may encourage lenders to market these products more aggressively to moderate-income households, who may not fully understand the long-term cost of sharing appreciation.
• The bill defines SAMs as second liens capped at 49% of purchase price, but does not limit the lender's share of appreciation; a lender could capture 100% of appreciation above the mortgage amount, creating asymmetric risk for borrowers.
• Retroactive effective date (December 31, 2025) means lenders who already issued SAMs in early 2026 may claim the tax exclusion immediately, creating a windfall for early movers without requiring any change in lending behavior.
• The income threshold (140% of area median income) is relatively high and varies by census tract, potentially allowing lenders to market SAMs to upper-middle-income households in lower-cost areas while claiming the bill targets moderate-income borrowers.

Section numbers refer to the bill text the analysis read — linked under Primary records below.

Who it affects

The bill creates a tax incentive for lenders to offer shared appreciation mortgages to moderate-income homebuyers, potentially expanding access to home equity financing without traditional debt. However, the tax exclusion is a direct federal revenue loss that benefits lenders (not borrowers), and the bill does not require lenders to pass savings to borrowers or cap the lender's share of appreciation, creating risk that lenders capture the tax benefit while borrowers bear the cost of sharing home

Who stands to gain

• mortgage lenders and servicers
• financial institutions offering shared appreciation products
• real estate investment firms holding SAM portfolios

Named in the bill

Internal Revenue Code of 1986, Section 139J (new), Truth in Lending Act Section 129C, AIG, CBRE, FBK, FMAO, PRU

Where it stands

5 cosponsors: 4 Republicans, 1 Democrats.

• Mar 26, 2026 — Introduced · Congress.gov: “Introduced in House”
• Mar 26, 2026 — Referred to House Committee on Ways and Means · Congress.gov: “Referred to the House Committee on Ways and Means”

Dates and quoted wording are Congress.gov's action record; the timeline shows status changes, not every procedural step.