A little-noticed amendment to a House bill would effectively end a two-year-old lawsuit alleging that a Boston nonprofit engaged in predatory lending after promising to help struggling homeowners stay in their homes, according to lawyers for the plaintiffs.
The suit alleges that BlueHub Capital deceived homeowners facing foreclosure into participating in a program that traps them in a cycle of high payments. Under the program, BlueHub buys properties from banks that are foreclosing on homeowners, then resells the properties to the original owners under terms the plaintiffs say are onerous.
The amendment, one of nearly 900 amendments to an $3.8 billion economic development bill expected to be taken up this week, would prohibit homeowners from bringing similar lawsuits against BlueHub or other nonprofits, though the agency is not specifically mentioned. It would apply retroactively and into the future.
“If this passes, BlueHub will continue to scam homeowners out of their home equity and will not be taken to court,” said Germain Harper, a BlueHub customer in Hyde Park. “This company has victims all over Massachusetts including Roxbury, Dorchester, Mattapan” and beyond.
David Kelston, a lawyer who is representing the 18 named plaintiffs and dozens of other families called the amendment, submitted by Representative Dan Cahill of Lynn, “absolutely awful.” He said the measure would nullify “the protections borrowers have under all the statutes protecting them from predatory lending practices.”
BlueHub Capital officials say the amendment will help the agency help homeowners, and that their foreclosure bailout program, called SUN, has prevented hundreds of people from losing their homes since its launch in 2009.
“SUN believes the proposed legislative amendment would confirm that programs like ours remain a critical tool to help families facing the loss of their homes,” said Autumn McLaughlin, BlueHub’s vice president of communications and external relations, in a statement. “The initiative is especially important in light of the possibility of a market downturn as the risk of recession increases.”
Cahill did not return calls seeking comment. Nor did BlueHub Capital’s lobbying firm, Smith, Costello & Crawford.
The suit, which appears headed for trial next year, alleges the nonprofit makes money at the expense of the homeowners by selling back the properties at a markup over how much BlueHub paid to acquire it. The agency then requires the homeowner to finance the purchase with not one, but two mortgages at higher-than-market interest rates.
The second mortgage — called a shared appreciation mortgage — entitles BlueHub to a portion of any increase in the home’s value when the homeowner wants to sell or refinance the property. In a housing market where values have risen dramatically, homeowners can owe BlueHub tens of thousands of dollars or more when they sell or try to refinance.
The shared appreciation mortgage, the homeowners say, is so burdensome that they cannot afford to refinance or sell their properties and become trapped in high interest rate mortgages.
Jonandria Jones-Booker, of Brockton, one of the plaintiffs, said her family has been “tremendously affected” by BlueHub’s practices:
“We went to refinance to our new lender for a lower interest rate and to borrow from our equity to do home renovations. We were notified by Blue Hub Capital that in order to refinance we’d have to give them 60 percent of our equity, which was over $95,000! We were devastated by this.”
The Boston City Council held a hearing last December at which homeowners described their financial plight.
Cahill’s amendment would prohibit homeowners from suing any agency that requires the property owner to share their appreciation upon the sale or transfer of a property — as long as the homeowners were notified of the requirement in advance.
If the homeowner was notified of any shared appreciation requirement, the lender “shall not be liable for monetary relief, injunctive relief, or other equitable relief at common law or by statute,” says the language, filed by Cahill.
In court filings, BlueHub’s lawyers said the program is fair.
The families freely signed up for the SUN program, BlueHub’s lawyers said, and they understood the terms of the mortgages, and saved money by working with the agency. The families “suffered no harm,” they argued, and BlueHub did not misrepresent anything.
They argued the suit was a “misguided attack” on a program that has helped more than 900 low-income families stay in their homes.
Kelston, the attorney for the plaintiffs, said there are several court sessions scheduled for the next few months. The plaintiffs’ lawyers have already taken a dozen depositions and have gathered 30,000 pages of exhibits.
“We think our claims are even stronger now than when we began the lawsuit,” Kelston said.
Bruce Marks, of the Neighborhood Assistance Corporation of America, a critic of BlueHub whose group is financing the lawsuit, said BlueHub’s chief executive Elyse Cherry “is panicked . . . She sees the writing on the wall — that she’s going to lose in court.”
Andrea Estes can be reached at email@example.com.