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A state Superior Court judge has ruled that Boston-based BlueHub Capital violated Massachusetts’ predatory lending statutes and other consumer protection laws.
The nonprofit organization provided shared-appreciation mortgages, a lending product typically offered to homeowners facing foreclosure and financial distress. Under these rare types of home loans, a homeowner agrees to give a lender or entity a share of any increase in the value of their home.
BlueHub had been sued by a group of Massachusetts homeowners backed by the Boston-based Neighborhood Assistance Corporation of America. The homeowners claimed that they never received adequate explanations of how the loans worked, and told a Boston Globe investigation that they felt duped.
The ruling in Suffolk Superior Court Friday ordered BlueHub has to implement policies to make sure that borrowers get proper deductions from the shared-appreciation provisions as a result of borrowers’ improvements to their homes.
Additionally, the ruling orders BlueHub to put procedures in place to make sure that prospective borrowers are fully told when they first inquire about a loan all important aspects of its controversial SUN shared-appreciation loan product, including how the sales price to the borrower is calculated, the interest the borrower will pay and how the shared appreciation program works.
In a statement, BlueHub Capital said the organization plans to appeal.
“BlueHub strongly disagrees with the Court’s ruling that the SUN Program transactions violated statutory regulations and requirements, and BlueHub plans to appeal on those issues at the appropriate time,” the statement said. “BlueHub believes it is important to consider the fact that Plaintiffs reduced their prior mortgage debt and repurchased their homes at or near the fair market value as of the time of their SUN program closings. BlueHub also notes that some Plaintiffs complained to the Massachusetts Division of Banks (DOB) about their SUN program transactions, but the DOB did not give them relief.”
Still, the judge did dismiss some of the homeowner’s claims, including the accusation that BlueHub made them sign unfair contracts. The judge also dismissed claims that BlueHub didn’t act honestly.
“The Court made clear that Plaintiffs cannot succeed by arguing that they did not read the documents they signed at their closings,” Sara Jane Shanahan, BlueHub’s lawyer from the Boston firm of Sherin and Lodgen LLP, said in a statement.
BlueHub has argued that its SUN shared-appreciation loans have saved hundreds of local families from foreclosure that would otherwise have had no recourse.
But its CEO Elyse Cherry has longstanding ties to Gov. Maura Healey, which came into sharp relief when the Legislature tucked a provision into an economic development bill last fall that shielded BlueHub from accusations like those it faced in this case. Healey later declined to veto the measure despite protests.
Chief Justice of the Superior Court Michael D. Ricciuti ruled that law did not apply retroactively and could not shield BlueHub from this case, and Attorney General Andrea Campbell publicly criticized the provision.
