Removing consumer protection from BlueHub mortgages was the wrong move

But the language goes too far in exempting BlueHub mortgages from state consumer protection and mortgage laws.

Tellingly, Attorney General Andrea Campbell had “serious consumer protection concerns” about the proposal because it would weaken its regulatory authority. After signing the bill into law, Campbell said he would develop regulations to protect consumers “to the fullest extent provided by the new law.” But, Campbell said, “I remain concerned about the precedent set when a particular product is exempt from our consumer protection laws — which are the strongest in the country. We cannot let this become the playbook for industries that want the same treatment.”

Campbell should use its regulatory authority to ensure that consumers are properly protected. And lawmakers should be open to changing the law they just passed if it becomes clear that more consumer protections are needed.

The issue is politically charged, as BlueHub Capital CEO Elyse Cherry is a prolific donor state Democrats, including Healey. Healey told a Globe reporter that he had not spoken to Cherry about the issue, which was added to the bill by the Legislature, not Healey.

But the issue isn’t about a person or even a nonprofit. BlueHub is the only organization offering shared appreciation mortgages in Massachusetts today, but companies in other states have offered other types of similar arrangements — such as providing cash in exchange for equity in a home. BlueHub may be well-intentioned, but the next company offering shared appreciation mortgages may not be – which is why maintaining consumer protections is vital.

The way BlueHub works is by accepting customers in default or foreclosure who often owe more than their home is worth. BlueHub negotiates with the bank to buy the home for less than the mortgage balance, then sells the home back to the owner for a profit. The homeowner can stay in the home with a lower mortgage than they previously had, although BlueHub’s interest rates are often above the market rate. BlueHub also executes a shared appreciation mortgage, meaning if the home increases in value, BlueHub gets a share of the increase (37 percent on average, according to BlueHub). If a homeowner sells, refinances, or pays off their 30-year mortgage, they must pay BlueHub for that equity.

To be sure, BlueHub takes a risk in making loans to low-income customers in foreclosure who couldn’t get a loan on the commercial market, and BlueHub needs a way to make sure the loans are repaid. According to BlueHub, the organization has made 568 loans to families in Massachusetts, many in Boston, Brockton, Lynn and Springfield. The average homeowner saves $734 per month on mortgage payments and has $91,000 down on their principal, according to BlueHub. More than 400 families have come out of the program — mostly by refinancing — with an average of $150,000 in equity, according to BlueHub.

“Virtually everyone that’s been through this process, every single one of them is so much better,” Cherry said.

Healey, after signing the bill, said he sees it as a way to help people at risk of losing their homes refinance and stay in their homes.

Rose Webster-Smith fought post-foreclosure eviction for five years when BlueHub bought her Springfield home from the bank and sold it back to her. The sale reduced her mortgage payments by $400 a month. As the head of an organization that fights for homeowners’ rights, she credits BlueHub with letting her keep her home. She understands that BlueHub has equity in her home and believes she can pay them off when she sells.

However, many customers are less than satisfied. Anthony and Margaret Oates, who own a two-family home in Dorchester, are married and have three grown children at home. Anthony, retired from the Boston School Department, was driving for Uber and Lyft, and Margaret had been laid off from her job at an insurance company when they filed for bankruptcy in 2011 and their home was in foreclosure, according to a complaint filed in -a lawsuit against BlueHub. BlueHub bought the house from the bank for $144,900 and sold it back to the Oates for $192,000. The family knew they were taking out a 30-year mortgage with an interest rate of 6.375 percent, above market rates at the time. They didn’t understand that BlueHub would own 54% of any appreciation in the value of their home. When they tried to refinance six years later to lower their interest rate and take out money for home repairs, they were told they couldn’t unless they paid BlueHub’s $140,000 appreciation fee.

A lawsuit pending in Suffolk Superior Court alleges that BlueHub’s loans violate state consumer protection laws and other laws governing lending. The transactions are “fraught with conflicts” and the financing practices are “disrespectful and oppressive,” the suit claims. A judge weighs motions for summary judgment.

Language in the economic development bill would impose handrails on shared appreciation mortgages: limiting them to homeowners who are at least 90 days delinquent; allowing them only when the new mortgage reduces a homeowner’s mortgage principal; and requiring written disclosure of terms. Cherry said BlueHub already adheres to all of these practices.

Critics — including organizations that represent both bankers and consumers — question whether these guardrails go far enough. For example, the disclosure form would encourage beneficiaries to speak with a housing counselor, but would not require counseling. Other high-cost mortgage products require borrowers to receive counseling.

Most troubling is the general exemption of shared appreciation mortgages from liability under state consumer protection and lending laws. What impact the language would have on the current lawsuit is unclear, but it would preclude future lawsuits. Jeffrey Wiesner, a consumer lawyer suing BlueHub, called it “absolutely extraordinary” to have legislation that “gives a Commonwealth entity immunity from consumer protection laws generally and those that were written in special way to cover mortgage financing”.

Cherry said all BlueHub wants is to codify existing practice. The company claims to comply with all applicable laws. But in light of the lawsuit and complaints that have been made to state regulators, Cherry said it’s clear that “the law is not as clear as it needs to be.” The exemption, she said, allows BlueHub to operate “without having to worry that every time you do a mortgage someone is going to take action.”

But the fear of litigation is not a good reason to do politics. As Andrew Pizor, senior attorney at the National Consumer Law Center, said, “People need the right to say, ‘You screwed me over.’ ” Shared appreciation mortgages have a place, but the potential for an unscrupulous operator to harm homeowners with them is too great for the state government to let its guard down.

Editorials represent the views of the Boston Globe Editorial Board. Follow us @GlobeOpinion.