I would NOT be attending any more family functions or visits with my ILs if BM was living with them.  Boundaries are being stomped on big time here!

I am guessing this is temporary until her permanent housing is ready?  To be honest, I can totally see my MIL doing something like this because she wouldn't want her grandbabies to be homeless and have to stay in a hotel or something.  Im curious as to why she couldn't stay at her own relatives closeby.. but maybe the dog presented issues there.  I'm guessing your MIL is a people fixer and pleaser and offered.  I am also guessing that MIL and the EX had a good relationship and EX has her ear and has figured out that she can exert pressure via his mom.

Mom probably didn't bring this up to him because she was probably hoping that the whole thing would be done before he figured it out. 

I don't know what kind of split the two had.. how much or little he has stepped up with his child etc.. I don't know if he should or shouldn't be stepping up more than he is.. or is doing more than enough already.  BUT, what I would suggest for a boundary with his mother is that she NOT get involved in the nuts and bolts of whatever arrangement gets set up.  She is not a party to the divorce and neither HE nor his EX should be sharing details of things with her.  It is her business whether she lets the EX stay there... it's her house.. but your DH can also choose to not visit mom as well.

BM in my situation moved in with my MIL before she and DH divorced (DH was military and they were moving back to home state after his contract was up, but OSS was starting school so BM moved back early to get him enrolled).

Then BM started dating someone while married to DH. Then, she moved her BF (now XH) into my MIL's house while still married to DH. Then BM served DH with divorce papers and tried to kick MIL out of her own house (she successfully did this a few years later with her own mother).

If you ask MIL why she did it, she'll tell you it was because she didn't know what would happen to the boys, her grands. The truth? She cared more about seeing her grandkids and being a FT granny than she did about her own son.

My MIL has inserted herself into more BS with BM than was ever necessary, and it has caused major custody and financial problems for DH. DH has found that the only way to limit the drama with his mother is to cut off contact.

Let your BF lose his sh*t on his parents and XW, and let him set the boundaries he wants to set. If BM and MIL are that chummy, then MIL can get all her visitation through BM. Your SO gets to decide who visits his child on his time, and who he interacts with. His mom will either hate never having her son and GD together, or she'll always blame your SO for being "unreasonable". Either way, it limits stress in his and your life, which is a major blessing.

This entire situation calls for firm boundaries, more structure, and consistency.

Your SO needs to formalize his custody arrangement with his ex. It's easier to handle things informally when the skids are quite young, but trust me, it's only a matter of time before BM takes your SO to court. He needs to start squirreling away $$ for legal fees, too. Custody time, cs, health insurance and day care costs need to be covered. This will create a framework for coparenting.

Next, your SO has to deal with his mother. She may be disordered, or merely ignorant but he needs to limit the amount of time she has access to his child. She's shown that she is not loyal to him and doesn't recognize basic family structure, so stop entrusting skid to her care. He can just say that he wants skid to have more opportunities for socialization and education blah blah to keep his real agenda on the down low, but this needs to happen. It may be saving him $$ now, but his mother is not an emotionally safe person to have caring for his child. Otherwise, the skid is going to be taught to disrespect your SO and you.

AFTER your SO has his child in a different daycare, he needs to draw HARD boundaries with his mom. I'm guessing that their relationship was already rocky, but he needs to be firm and call her out on her lack of boundaries and disloyalty.

If MIL is "day care" then DH needs to tell his XW to pay his mother since... his mother is... HIS mother and is doing HIM a favor by watching the GrandSpawn. Since XW is no longer family... she gets no favors from HIS mother.

Then DH needs to take  his parents out for a come to Jesus dinner and set them straight. 

My mom is one to consider a DIL a daughter and that as a lifetime bond regardless of the marrital status of that DIL in relation to her son(s).  But, she gained clarity when my cavern crotched adulterous whore of an XW pulled her whorish crap and ultimately divorced.  Though my mom had little contact with my XW she was torn as to her relationship with my XW.  My XW was the first add on female in the Rags clan.  So my mom applied significant connection to my XW that really was not there.  It all came to an end when she was visiting me a few years after the divorce.  My XW and I were in the process of selling our marrital home and she was pissed that I demanded half.  She called one evening as my parents and I walked into my condo.  I answered the phone and the XW started cussing me up one side and down the other.  My mom walked up to me, took the phone out of my hand said "You will not speak to my son that way. Get a life!" and slammed the phone back onto the receiver.

And that is when my mom gained clarity.

It would be much harder this time around as my mom and my bride are pretty much BFFs.  I'm screwed when my DW and I have any disagreement.  She just says "Oh ya?  I am calling your mother." At that point I just surrender.     

I don't know where I stand here... When we initially moved a few hours away - taking SD with us full-time, I told BM she was welcome to save some money herself, and I would save some as well, and help her move up nearby. I told her she was even welcome to stay with us and look for places if she needed. I wanted what was best for SD, and unfortunately, neither of her two bioparents made enough money at the time to support her but I made a decent amount with opportunity for advancement if we moved.

So the best thing for SD was moving so at least I could afford what she needed. I wanted her mom to be closeby, still, so I offered help anyway I could. Her mom didn't take me up on it. It wasn't overly important to her to be near SD or be involved with SD. But at least I offered lol 

I agree. My own mother would have NEVER even entertained the idea of allowing my ex to stay in her home, no matter how temporary - because it’s a major boundary to cross with your own child. 

My MIL on the other hand, would not bat an eye at saying “Yes” to BM. Her son’s verbally and physically abusive ex wife. But, then again, my MIL is a self-serving arse that destroys inter family relationships, so it would be totally lost on her, the irreparable damage she waould be causing. 

I feel for you, OP. My MIL is the same way. 

Interestingly my DW and my Rents are BFFs.  If something happens to me or to our marriage I don't think that would change.  So, if this marriage crashes and burns I am relegated to a life of unintroduced serial significant others.

Fortunately the marriage is looking good so far.

Of course MIL hasn't done anything illegal. But she is an a$$hole.

OP -  now you know your MILs true colors.  Lower your expectations.  And remember this when she's feeble and weak and would like your help.   You owe her NOTHING.