They are at the center of lobbying efforts
Massachusetts nonprofit lender BlueHub Capital is seeking legal protection for its shared appreciation mortgage product as a legislative conference committee works to finalize the legislation, the CommonWealth Beacon reported.
The nonprofit deployed shared appreciation mortgages during the 2010 foreclosure crisis, helping homeowners facing foreclosure stay in their homes by buying the properties from lenders and selling them back to homeowners with smaller mortgages and monthly payments.
In return, BlueHub received a share of any increase in the home’s value when it was sold or refinanced.
The rapid increase in home values has led to complaints from homeowners surprised by the amount BlueHub received when they tried to sell or refinance. This has resulted in a four-year court battle set to conclude in September.
However, BlueHub has already convinced the Senate to include a provision in its version of the economic development bill.
This provision would exempt nonprofit lenders like BlueHub from certain state laws if they disclose the terms of shared appreciation mortgages upfront. While BlueHub is not named, it is the only nonprofit issuing these mortgages, the report noted.
The provision requires support from House members of the conference committee to be included in the final legislation. This has sparked lobbying from both supporters and critics as the bill awaits final approval on Wednesday.
Nardella Thomas, of Webster, the lead plaintiff in the lawsuit against BlueHub, warned conference committee members about the implications of the Senate language.
“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,” Thomas wrote in a letter. “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 have also submitted letters opposing the amendment.
On the other hand, Rose Webster-Smith, a housing advocate and recipient of a BlueHub shared appreciation loan, supports the amendment. She said BlueHub clearly explains its terms and doesn’t sell them to other lenders.
“They’re not going to put you in a loan you can’t afford,” said Webster-Smith. “This is a tool to get you back on your feet.”
BlueHub argued that the legislation would allow them to use shared appreciation mortgages in the future if foreclosures rise again. They noted that while home values are currently stable, this tool could be useful in future downturns.
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“With high home values across the 11 states BlueHub serves, homeowners are less likely to be underwater on their mortgages at this time,” BlueHub said in a statement. “Nationwide, less than 3% 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 company insists the proposed legislation is not retroactive and will not impact the ongoing court battle.
However, critics, including Grace Ross from the Massachusetts Alliance Against Predatory Lending, remain skeptical.
“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,” Ross said in a letter to the House and Senate conferees.
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