Lobbying intensifies on BlueHub mortgage amendment

THE SIX-MEMBER legislative conference committee trying to find common ground on a wide-ranging economic development bill is also facing heavy lobbying pressure on a narrow provision dealing with a product called a shared appreciation mortgage.

A shared appreciation mortgage is a product that was deployed by nonprofit BlueHub Capital during the foreclosure crisis around 2010.  BlueHub helped homeowners facing foreclosure, typically owing more on their mortgage than the home was worth. BlueHub helped them stay in their houses by buying the homes from the lender, and then selling their residences back to the homeowners with a smaller mortgage and a smaller monthly payment.

But BlueHub also took out a shared appreciation mortgage on the home, which entitled the Roxbury-based company to a share of any appreciation in the home’s value at the time it is sold or refinanced. Given the runup in home values, many homeowners were stunned at how much money BlueHub pocketed when they tried to sell or refinance.

A four-year court battle over the shared appreciation mortgages is coming to a head this September, but BlueHub isn’t waiting for a court judgment. BlueHub convinced the Senate to include a provision in its version of the economic development bill that would exempt nonprofit mortgage lenders who make certain initial disclosures about a shared appreciation mortgage from the reach of a number of state laws. BlueHub is not mentioned by name, but it is the only nonprofit issuing shared appreciation mortgages.

The provision needs support from the conference committee’s House members to make it into the final version of the legislation, and lobbying is intense on both sides, particularly with the legislative session scheduled to end on Wednesday.

Nardella Thomas of Webster, the lead plaintiff in the lawsuit, fired off a letter to the conferees warning them that going along with the Senate language would open a big can of worms. “In plain language, what this means is that mortgage lender BlueHub Capital – the only [nonprofit] mortgage lender in Massachusetts making shared appreciation mortgages – will be exempt from every consumer protection law in Massachusetts,” she wrote. “This legislation is a get out of jail free pass for one mortgage lender. And what will happen next? Every other mortgage lender will want the same thing.”

The National Consumer Law Center and the Massachusetts Mortgage Bankers Association submitted similar letters opposing the amendment, which was added as part of a large group of amendments to the economic development bill with no discussion or debate.

Rose Webster-Smith, a housing advocate with the organization Springfield No One Leaves who has a shared appreciation loan from BlueHub, is pushing for adoption of the amendment. She says the company very clearly spells out the terms of its mortgages and doesn’t sell them to other lenders.

“They’re not going to put you in a loan you can’t afford,” she said of BlueHub. “This is a tool to get you back on your feet.”

BlueHub officials say their pursuit of the legislation is to codify the law so the shared appreciation mortgage can be used again if foreclosures increase.  BlueHub said it did a buy-back transaction with a shared appreciation mortgage in June 2024, but acknowledges it is a little-used product now because of stable home values.

“With high home values across the 11 states BlueHub serves, homeowners are less likely to be underwater on their mortgages at this time,” the company said in a statement. “Nationwide, less than 3 percent of homes are currently underwater. However, the housing market is cyclical and the buy-back product will be used more often when values decrease.”

The nonprofit company said the legislation it is pursuing on Beacon Hill is not retroactive, suggesting it would have no impact on the court fight. Yet the company’s opponents say they find that claim hard to believe.

“If what Blue Hub was engaged in was legal, they would not be asking this General Court to pass what is essentially a special law for their benefit,” said Grace Ross, on behalf of the Mass. Alliance Against Predatory Lending, in a letter to the House and Senate conferees.

Webster-Smith said BlueHub merely wants to codify the law on shared appreciation mortgages to assure their availability in the future, but she added that it’s unclear how the conference committee will ultimately decide on whether the proposed change in law will affect the court fight. “It could be going forward or it could be retroactive,” she said.