A four-year-old court battle between nonprofit lender BlueHub Capital and a group of angry customers is spilling over into the Legislature, as the Senate last week approved an amendment to an economic development bill that would lay out an exclusive regulatory scheme for the company’s unusual shared appreciation mortgages.

The legislative push comes as the legal battle in Suffolk Superior Court appears to be nearing a resolution, with both sides seeking summary judgments that they are in the right. Both sides can point to customers on their side, some saying they were ripped off and others who insist BlueHub helped save their house.

The legislation and the court case revolve around shared appreciation mortgages and their role in BlueHub’s business model. BlueHub officials say their target customer is someone who is facing foreclosure and in danger of losing their home. BlueHub buys the house from the bank moving for foreclosure and then sells it back to the homeowner with a much smaller mortgage accompanied by a smaller monthly payment.

According to BlueHub, the company has provided 558 loans to families across the state, with a focus in Boston, Brockton, Lynn, and Springfield.  On average, the company says, homeowners save $734 per month on their mortgage payment, or about 30 percent, and their mortgage principal is cut by an average of $91,000, or 31 percent.

But the homeowners also must agree to a shared appreciation mortgage, which entitles BlueHub to a share of any future appreciation on the home when it is sold or refinanced. Shared appreciation mortgages are largely unregulated, and the focus of the court case is that BlueHub’s use of them sidesteps many state and federal consumer protections. The Boston Globe reported on the lawsuit in 2020.

BlueHub, based in Roxbury and headed by Elyse Cherry, has pushed over the past several years for legislation that would codify into law its business model and have the law apply retroactively, making the court challenge moot. This year the nonprofit says it eliminated the retroactive reach of the law, added more consumer protections, and focused more on creating a regulatory environment in which the company’s business model could thrive.

The amendment never mentions BlueHub Capital by name, but its reference to an entity with a tax-exempt filing status suggests it is tailor made for BlueHub. As long as a number of disclosures are made to customers, the amendment also states that the tax-exempt entity shall not be held liable for its shared appreciation mortgage under common law and various state laws.

The BlueHub bill went through the legislative hearing process and was attached as an amendment to an economic development bill in the Senate last week. It passed on a voice vote as part of a large bundle of amendments designated for approval by Senate leaders. The amendment was sponsored by Sens. Paul Feeney of Foxborough, a Democrat, and Patrick O’Connor of Weymouth, a Republican. Blue Hub retained the state’s most prominent lobbying firm – Smith, Costello & Crawford – to help shepherd the legislation.

In a statement, BlueHub said roughly 42 percent of its clients entered the program with no home equity and exited with an average of $150,000 in equity. Overall, the company says, its program has put more than $45 million back into the pockets of homeowners in Massachusetts. The company also operates in a number of other states, including Connecticut, Rhode Island, Illinois, Maryland, New Jersey and Pennsylvania.

David Kelston, an attorney with Adkins, Kelston & Zavez, the law firm representing plaintiffs challenging BlueHub Capital in court, said the company’s attempted end-around in the Legislature is self-serving and proof that what it is doing is illegal.

“The disclosures they propose for themselves and no one else (there is no other supposedly non-profit lender with shared appreciation), are puny and meaningless, and, once made, open the door for them to do anything they want thereafter,” he said in a statement. “What this legislation does is free one mortgage lender in all of Massachusetts from complying with existing law. It’s an abomination that will harm BlueHub’s low-income borrowers and serve as a precedent for every other unscrupulous mortgage lender. The very fact that BlueHub could propose it is an outrage and proof positive that they are in wholesale violation of the law.”

This article first appeared on CommonWealth Beacon and is republished here under a Creative Commons license.