Cheryl and Dante Ortiz were diagnosed with different types of cancer in the same week. The couple were facing mounting medical bills and fell behind on their mortgage. A day after a doctor’s appointment, they rushed out of the hospital to sign papers in an effort to save their home in Southbridge, Massachusetts.
“We had the biopsy, we taped his neck, and we went straight to Boston to sign the mortgage papers,” recalls Cheryl Ortiz. “The only thing I remember about October 31, 2013 is that I signed some papers there and was about to lose my husband. Don’t ask me which newspaper, who was there, I don’t know.
What the couple signed, they later discovered, was a “split appreciation” mortgage with a Roxbury-based nonprofit that says it helps struggling homeowners avoid foreclosure. BlueHub Capital purchased the Ortizes’ home from the bank and sold it back to the couple. When they refinanced three years later, Cheryl Ortiz says she wishes she had read the fine print: the relatively new kind of the mortgage they signed required them to pay BlueHub 52% of their principal in the residence. She owed the lender $40,000 before she could get a new loan.
In a protest Tuesday outside the Roxbury headquarters of BlueHub, formerly Boston Community Capital, Cheryl Ortiz and a few dozen other landlords rallied against its lending practices. Cheryl, her husband and 17 others describe the nonprofit’s practices as “predatory” and “misleading” in a lawsuit they filed two years ago in Suffolk Superior Court. They had all received mortgages through BlueHub’s Stabilizing Urban Neighborhoods, or SUN, program.
“They made it seem like they were a godsend and we were going to be saved and we would have our home,” Cheryl Ortiz said. “They told us that we didn’t need a lawyer because they were a non-profit organization and they provided us with all the help. Every step of the way, they convinced us that it was in our best interest and that we were going to be safe.
BlueHub has defended its lending practices as beneficial to the distressed borrowers it serves.
“Virtually all homeowners are significantly better off through their participation in the BlueHub SUN program than they would have been had they continued in their default or foreclosure situation,” a spokesperson said in a statement to GBH News. “To our knowledge, no one is operating a similar program, much less at a cheaper price.
Since 1985, the nonprofit foreclosure prevention organization says it has worked with more than 1,000 families in 29 states through its split appreciation mortgage program. The spokesperson said BlueHub “fully discloses the terms…to each owner multiple times. None of the states in which SUN operates has ever identified a compliance issue. In fact, all complaints filed by plaintiffs with the Massachusetts Division of Banks have been formally dismissed.
Split-appreciation mortgages emerged from the 2008 housing crisis as an option for homeowners facing foreclosure, according to Molly Goodman, executive director of Midas Collaborative, a nonprofit focused on economic stability and housing. affordable in Massachusetts.
“It’s very unique in that no one has really experienced such a massive drop in property values before, and it was sort of a last resort to keep homeowners in their homes,” she said. declared. “It’s not the kind of mortgage program a first-time home buyer would use for a purchase program, but it was a response to all the negative and predatory options that already existed and an effort to keep the people in their homes and in their communities.
Above-market interest rates and home equity payment agreements were created as a stopgap measure to protect lenders like BlueHub from what began as a financially risky practice, Goodman said. .
“It’s important to remember that between 2009 and 2015, I don’t think many people could have predicted that the housing market would be where it is today with such an increase in equity,” he said. she declared. “There was really a risk at the time that they lost money. And they also have investors who give them money to do the program, that’s why you see higher interest rates students.
Homeowners like Nardella Thomas, who signed a split-appreciation mortgage with BlueHub in 2012, say it was not transparent that she owed 42% of her net worth. Thomas took two jobs to meet the payments from his house in Webster, Massachusetts.
“It’s predatory, and they have the audacity to say they’ll work with the owners if we turn our deeds over to them,” Thomas said. “It’s nothing but modern day sharecropping. We did not register for this.
In response to the criticism, BlueHub’s spokesperson said, “Owners who left the program enjoyed significant home equity, personal wealth, that would not have been available otherwise.”
In 2020, BlueHub earned nearly $21 million in loan interest, according to its financial state. In the 2020 legal complaint against the nonprofit, attorneys representing the Ortizes, Thomas and other plaintiffs describe its income from split-appreciation mortgages as “outsized profits.”
The lawsuit, filed with legal and financial resources provided by the Neighborhood Assistance Corporation of America, is now entering a deposition phase, according to CEO Bruce Marks.
“We are going to depose all of their leaders, the masterminds behind this predatory scam,” he said. “The regulators dropped the ball on this. The Massachusetts Banking Commissioner had dropped the ball on this. The [Massachusetts] the Attorney General dropped the ball on this. That’s why we are continuing.
Lawsuit claims BlueHub’s lending practices are ‘disadvantaged’ by applicable state law which requires lenders to inform borrowers of their most affordable loan options.
The case is set to go to trial later this year in Suffolk Superior Court in Boston.