Embattled Boston nonprofit violated consumer protection laws, judge rules 

由 Samantha J. Gross

After a nearly five-year legal battle, a Massachusetts Superior Court judge has ruled that BlueHub Capital, a Roxbury nonprofit, violated predatory lending statutes and other lending laws in its mission to help distressed homeowners stay in their homes. 

In a statement, BlueHub wrote it “strongly disagrees with the Court’s ruling” the nonprofit violated the law, and that it “plans to appeal on those issues at the appropriate time.” 

The ruling resolved central arguments in the case, but left the resolution of relief and damages, among other questions, for a trial at a yet-to-be-determined date. 

The 58-page ruling, filed in Suffolk Superior Court Friday, presents a difficult political question for Governor Maura Healey, who has defended BlueHub and her friend and donor chief executive Elyse Cherry. In 2024, Healey signed a bill that exempts BlueHub 从该州的 consumer protection laws — legislation that Chief Justice of the Superior Court Michael D. Ricciuti also ruled was not retroactive and did not apply to this case. 

A spokesperson for Healey did not immediately respond to requests for comment.

The legal fight centers on a program under which BlueHub buys properties from banks that are foreclosing on the homeowners, then resells them to the original owners.

As part of the deal under the program known as BlueHub SUN, the homeowners take on what is known as a shared appreciation mortgage — a relatively rare type of real estate loan that entitles BlueHub to a portion of any increase in the home’s value when the homeowner sells or refinances the property.

A group of Massachusetts homeowners sued BlueHub Capital in 2020, alleging the nonprofit engaged in “predatory lending.”

According to the lawsuit, dozens of people in Massachusetts who borrowed from BlueHub — which at the time was known as Boston Community Capital — said they discovered belatedly they had agreed to a shared appreciation mortgage and they were misled about what they were signing up for. 

The borrowers said they had no lawyer at the closing and no one adequately explained the agreement, which included a requirement that they not talk about the terms of the deal, according to the lawsuit.

The Superior Court ruling decided several key arguments in the case, including that: 

• The mortgages and shared appreciation promissory notes issued by BlueHub should be viewed as a single transaction by BlueHub but were not, a process known as “loan splitting.”
• BlueHub failed to disclose the full terms of the shared appreciation mortgages to borrowers.
• There is a question to whether BlueHub acted in a fiduciary capacity toward the homeowners, since BlueHub’s affiliate, NSP Residential LLC, negotiated directly with the original lenders on behalf of the homeowners, acting as both their agent and their representative. BlueHub argued the nonprofit was not a fiduciary. 

Jeffrey Wiesner, a partner at the law firm Wiesner McKinnon LLP who is representing the homeowners in the lawsuit, said Monday the decision is “an exclamation point.”

“We now have a court unequivocally determining these mortgage programs violate multiple consumer protection laws,” he said. “This is a resounding victory.”

The judge also found the shared appreciation mortgage sold to homeowners had a so-called balloon payment, or a one-time payment due to BlueHub at the end of the loan term. BlueHub failed to disclose this to homeowners, Ricciuti wrote, and never checked the box “yes” on federal Truth in Lending Act forms that asked whether there was a balloon payment. 

Internal BlueHub communications from 2016 and 2017 filed as evidence in the case showed that top executives, including Cherry, discussed how the mortgages do essentially involve a balloon payment. 

“If we don’t [release the shared appreciation mortgage], it effectively acts like a balloon payment creating all the challenges that come with that structure,” wrote then-Chief Operating Officer Sharon Shepherd.

In another win for the plaintiffs, the judge also ruled a 2024 law that gave immunity to BlueHub could not be applied retroactively in this case.

“[BlueHub] contend[s] that the statute should apply retroactively because it merely clarifies rather than changes existing law,“ the judge wrote. ”This is far from the case.” 

Not all of the opinions issued in the judge’s ruling were in favor of the plaintiffs. He dismissed claims made by the homeowners, including accusations that BlueHub had them sign unfair contracts. The judge also dismissed claims that BlueHub didn’t act honestly.

In a statement, Sara Jane Shanahan, counsel for BlueHub and managing partner of the firm Sherin and Lodgen LLP said: “The Court made clear that Plaintiffs cannot succeed by arguing that they did not read the documents they signed at their closings.”

In a statement from BlueHub, the nonprofit said the judge “failed to recognize the SUN Program’s relation to BlueHub’s core nonprofit mission,” and that the nonprofit “will continue to vigorously defend the case.”

“BlueHub founded this program to save people’s homes when they were underwater, in default, and facing foreclosure,” the statement read. “Others tried to persuade prior lenders to forgive mortgage debt. No one else succeeded. But the SUN Program did.”

The ruling follows recent action by the state attorney general taking aim at the nonprofit’s business model as well. Attorney General Andrea Campbell last month proposed sweeping regulatory changes that would clamp down on BlueHub.

Many of Campbell’s proposals also appear in a bill filed by state Representative Michelle Dubois, a Brockton Democrat, whose district is home to dozens of families who participated in the BlueHub program at the center of ongoing litigation.

The bill has not yet had a hearing.

Nardella Thomas, a plaintiff in the lawsuit and backer of Dubois’ bill, said of the ruling: “This is the justice we’ve been waiting for.” 

“There is no way that anybody could say that this organization serves the public good,” she said. “They are who we thought they are.” 

She added that the ruling has decimated her trust in Healey, who she said she and a number of other homeowners had voted for. 

“She could not find herself to be objective and fair for the people,” Thomas said. “She looked the other way.” 

The next step in the case is a trial, where relief, damages, and other details will be hashed out. No date has been set.