Non-Disclosure Agreements for Mortgage Loan Modifications?

An out-of-state banking regulator has launched an investigation into whether a mortgage servicing firm required struggling homeowners to sign an agreement not to publicly deride the firm if they hoped to have their loan modified.
tosignacontract1.jpg
Reuters reports that such contracts may have been required by more than one firm, including Ocwen Financial Corp., which is being investigated by New York’s Financial Services Superintendent Benjamin Lawsky.

Foreclosure defense lawyers in Miami know that between the housing market crash and the robo-signing foreclosure fraud scandal (to say nothing of a host of other issues), these companies have had their names dragged through the mud.

But here’s the thing: There is every indication that the criticism was well-placed and deserved.

What’s more, these firms suffered very little for the damage they did throughout the housing crisis. Between the pittance-level government settlements and the absence of any real criminal prosecution of those who blatantly broke the law and took advantage of borrowers, these firms made out pretty well.

Home loan modifications are extended in cases where borrowers can’t keep up with their payments, usually because their mortgages are underwater – a byproduct of the banks’ perpetual greed in pushing overpriced property onto those who could scarcely afford to pay. The situation has been made worse by exploitative practices like force-placed insurance.

These companies often receive government-funded incentives to extend home loan modifications, as part of the $20 billion national mortgage settlement reached last year, a remedy for industry-wide abuses.

But heaven-forbid anyone speak a bad word about these firms!

According to Reuters, these so-called “gag rules” are reportedly being demanded in cases where borrowers are seeking to have the terms of their mortgage eased. The agreements require borrowers to sign an agreement promising not to speak disparagingly of the company. This includes posts made on the Internet and/or social media.

Lawsky said if true, the practice is “deeply offensive” and “troubling.”

He went on to say that these companies have a duty to act in what is the best interest of both investors and borrowers. Attempts to muzzle homeowners who attempt to spotlight shoddy or unfair business practices is inherently unfair.

Ocwen has since released a statement saying it only requires such agreements when it is in a legal dispute with a homeowner, and that those cases represent less than 1 percent of all of the loans it manages.

Whether that’s true remains to be seen. There are indications the New York probe will be expanded to include several additional mortgage servicing firms.

The investigation comes after months of analysis into Ocwen’s dealings, particularly with homeowners. The concern, Lawsky was quoted as saying, is that borrowers are essentially turning into “fee factories” for these firms.

Ocwen’s plans to buy some $3 billion worth of mortgage servicing rights from banking giant Wells Fargo was halted by banking regulators concerned about the rapid pace of the company’s growth, as well as its reputation for unfair dealing with borrowers.

If you’re battling foreclosure in Miami or the surrounding areas contact Jacobs Keeley for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on “Debt Warriors with Bruce Jacobs,” discussing foreclosure topics that matter to YOU.

Additional Resources:
N.Y. Regulator to Review Borrower ‘Gag Rule’ Imposed by Servicers, May 21, 2014, By Kristin Broughton, Mortgage Servicing News
More Blog Entries:
HAMP-Modified Mortgage Interest Rates to Increase, Starting This Year, May 14, 2014, Miami Foreclosure Lawyer Blog