A much applauded and maligned mortgage program – Boston-based BlueHub Capital’s SUN program – promises to give second chances to homeowners in dire straits. But homeowners, mortgage, and consumer protection groups paint a darker picture: that the program is actually taking advantage of the people it claims to help.  

About a year after legislators passed and Gov. Maura Healey signed a law tailored to protect the Roxbury nonprofit from consumer protection liability, the organization is processing an unfavorable ruling from a Suffolk County Superior Court judge and bristling against new rules proposed by the attorney general to require more disclosure to homeowners about what they might owe and limit how much revenue the program can bring in. 

This week on The Codcast, CommonWealth Beacon reporter Jennifer Smith interviews Elyse Cherry, CEO of BlueHub Capital and Healey donor, about the ruling and the political machinations behind the new law signed by her longtime friend. 

“We think the judge is dead wrong,” Cherry said. “We do not think it’s predatory. As I say, I cannot imagine how a loan could be characterized as predatory when the borrowers owe less money than they owed in the first place.” 

When a homeowner is facing foreclosure. BlueHub, through an affiliated mortgage company, buys out the home and sells it back to the owner for 25 percent more than what BlueHub paid for it. Most of these homeowners also take on an unusual second mortgage known as a shared appreciation mortgage, which obligates the owner to pay a percentage of any future home appreciation to BlueHub if they want to sell or refinance the property. 

A group of homeowners sued in 2020, arguing that they did not understand the mechanics of the agreement when they first signed up. 

A Suffolk Superior Court judge last week found the nonprofit had violated state consumer protection laws on predatory lending practices. Judge Michael Ricciuti determined that BlueHub engaged in illegal “loan splitting” and did not disclose the full terms of the shared appreciation mortgage to homeowners.  

Ricciuti rejected arguments from BlueHub that the organization should be immune from consumer protection suit because it is engaged in a community-minded endeavor. The group’s “core activity is not charitable, but purely commercial,” he wrote. Cherry disputes that, arguing that the four decades of nonprofit work and lack of business competitors suggest this is not a profit-oriented organization.  

As the lawsuit progressed, lawmakers tried repeatedly to offer BlueHub some clear cover for its business practices. An effort in 2022 to make nonprofits offering shared appreciation mortgages – which only covers BlueHub in Massachusetts – retroactively immune from lawsuits as long as they make a limited set of required disclosures fizzled. But another version, that Cherry said specifically is not retroactive, passed in the sweeping 2024 economic development bill.  

Despite pleas to veto the language, Healey signed the bill into law. This sparked cries of personal favoritism, as Cherry has long maxed out donations and held fundraisers for the governor and former attorney general. For her part, Cherry notes a long history of political donations – including to the legislative leaders who had to sign off on the bill in the first place – and says the donations are personal but consistent with the nonprofit’s interest in supporting elected officials aligned with its mission. 

Next steps are still foggy. BlueHub plans to appeal the ruling at a later time. And after a seemingly sweeping win on Beacon Hill, the attorney general’s office is proposing a stricter set of disclosures under new regulations oriented at that business model. 

During the episode, Smith and Cherry discuss the legal ruling (8:15), the law designed to protect BlueHub (15:00), and what regulations the organization says it would accept (24:35).