Mortgage

Ocwen Exec: We do not require “gag clauses” for modifications

Nonbank servicers remain on chopping block

After being accused of forcing borrowers to promise not to insult them publicly, nonbank mortgage servicer Ocwen Financial Corp. (OCN) issued a rebuttal saying it does not require “gag clauses” for ordinary loan modifications. 

A Reuters article posted that nonbank mortgage payment collectors at companies are agreeing to ease the terms of borrowers’ underwater mortgages, but are increasingly demanding that homeowners promise not to insult them publicly. And in some cases, they are demanding that homeowners' lawyers agree to the same terms, in addition to possibly requiring them to agree not to sue them again.  

But there's just one catch — it’s not true.

John Britti, who was recently promoted to chief investment officer from executive vice president and chief financial officer at Ocwen, said, “Ocwen does not require non-disparagement clauses in mortgage loan modifications in the absence of any borrower legal claims, which is the case in the overwhelming majority of our modifications.”

Britti did note, “In the rare occasion where there is a legal dispute – and these represent only a fraction of one percent of the loans in our portfolio – more often than not we are able to work out an amicable resolution with the borrower.  In those cases, we generally request the settling party to agree to refrain from publicly disparaging the company in the future.”

“We find this is useful for both sides to achieve finality of the dispute and believe it is reasonable and consistent with industry practice,” he added.

However, the Reuters article caught the eye of New York State Department of Financial Services Superintendent Benjamin Lawsky, who already has nonbank servicers on the chopping block.  

"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," Lawsky said in another Reuters article.

Back in February, Lawsky put an indefinite freeze on the $2.7 billion MSR deal between Ocwen and Wells Fargo (WFC). 

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