An embattled mortgage servicer was allegedly forcing homeowners to sign a gag order barring them from bad-mouthing the company before completing a reworked home loan.
If the homeowners didn’t bow to the pressure of Atlanta-based Ocwen Financial and promise not to complain about any substandard service, they could lose their mortgage modification and end up out on the street.
New York’s top bank regulator said Wednesday he planned to investigate such claims.
The new scrutiny comes years after the US real estate mortgage meltdown but as 9.7 million homeowners — roughly one in five across the country — still owe more on their home loan than their house is worth, according to a report this week by Zillow, a real estate database company.
Word of the upcoming probe by Benjamin Lawsky, superintendent of New York’s Department of Financial Services, comes the same day that a group of Pennsylvania homeowners filed a class-action lawsuit against Ocwen, claiming the company at times waited nearly 200 days longer than the law allows to file mortgage satisfaction notices.
The delay kept homeowners from refinancing their mortgages, the suit claims.
Ocwen buys from banks mortgages that are about to default — as well as those insured by agencies like the Department for Veterans Affairs — and then services those loans.
“Reports that Ocwen is imposing a gag rule for certain struggling homeowners — preventing them from criticizing the company — are troubling and deeply offensive,” Lawsky said in a statement.
“We will investigate this issue immediately,” Lawsky added. “Servicers have a responsibility to act in the best interest of borrowers and investors — not to try and sweep shoddy practices under the rug or muzzle struggling homeowners.”
The New York regulator installed a compliance monitor at Ocwen in December 2012, but wasn’t investigating the alleged gag orders until Reuters first detailed Ocwen’s alleged gag orders Wednesday, according to a person directly familiar with the investigation.
Ocwen, which is owned by billionaire curmudgeon Bill Erbey, gives a rosy picture of what they do.
The website is filled with pictures of smiling families and the slogan “Helping Homeowners Is What We Do!”
There’s even a testimonials section where one supposed customer shouts “WE LOVE OCWEN.”
But the company isn’t as altruistic as it makes itself out to be, said Eric Lechtzin, a Berger & Montague lawyer who filed the Pennsylvania class action — the third such suit filed against Ocwen.
Some struggling homeowners are pressured to sign mortgage agreements with balloon payments and aren’t told how much will have to be spent, Lechtzin said.
That payment is “substantial,” he said. “They would have to obtain a new mortgage loan when the balloon payment comes due.”
“It’s a financial black hole,” he said.
“When faced with foreclosure, and the options are sign this agreement and keep your home, or don’t and we will go with the foreclosure, it’s not a situation where the borrower is in the position to negotiate the terms,” Lechtzin said.
Ocwen representatives didn’t respond to a request for comment.