Let the people speak!
New York’s top bank regulator has declared victory over a mortgage servicer that tried to keep some homeowners from bad-mouthing the company.
Embattled Ocwen Financial will stop pushing those borrowers to sign a gag order as a requirement to getting their home loan modified, Benjamin Lawsky, the head of the New York Department of Financial Services, said Tuesday.
“In discussions with our department, Ocwen has agreed to no longer seek gag rules as part of settlement agreements or loan modifications with borrowers,” Lawsky said in a statement.
In addition, Ocwen, already operating under a DFS monitor, won’t enforce gag rules in current provisions, Lawsky said.
Ocwen, which is run by billionaire Bill Erbey, profits from buying risky mortgages from banks and then extending high interest rate loans to the already indebted homeowners.
The company has been under heightened scrutiny for years because of allegedly abusive practices.
Lawsky’s office installed the monitor to oversee Ocwen’s compliance since 2013, according to a regulatory report.
The Securities and Exchange Commission and the Consumer Financial Protection Bureau have also increased their oversight of the company.
The Atlanta-based lender was trying to withhold a new line of credit in exchange for a promise by some of its borrowers not to squawk about Ocwen’s business practices.
Ocwen’s non-disparagement clauses are “rare” and are included in settlement agreements involving disputes with the borrowers, said David Millar, an outside spokesman for the company.
“To clarify, Ocwen has never required non-disparagement clauses for mortgage modifications,” Millar said.
“Our agreement with the DFS deals with the highly unusual situation where there is a legal settlement agreement with a borrower, representing a fraction of 1 percent of our portfolio.”
Ocwen had about $8 billion in assets as of March 31, according to a regulatory filing.
While Ocwen didn’t give Lawsky the precise number of borrowers it has gagged or attempted to gag, there could still be a “potentially significant number of homeowners at risk,” said Matt Anderson, a Lawsky spokesman.
“Our understanding in discussions with the company is that homeowners with settlement agreements where loan modifications were provided are among those at risk of being gagged by these clauses,” he said.