Benjamin Lawsky, superintendent for the New York Department of Financial Services, is reportedly investigating a practice among certain mortgage servicers to include an extra clause in foreclosure settlements precluding borrowers from making disparaging statements about their servicer in public forums.
According to a Reuters report, mortgage servicers including Ocwen Financial, Bank of America and PNC Financial Services are increasingly demanding that homeowners and their attorneys promise not to insult them publicly after agreeing to ease the terms of their underwater mortgages. In some cases, servicers are requiring borrowers to agree to terms that prohibit them from suing again.
Lawsky's department – as well as lawyers representing underwater borrowers – argue that such ‘gag orders’ can prevent borrowers from bringing future claims and may put them at risk in the event they are wronged by the same mortgage servicer.
According to the report, the ‘gag orders’ aren't just showing up on foreclosure settlement papers – they are also being used when servicers grant ‘ordinary loan modifications’ outside the courts.
Rick Simon, a spokesman for Bank of America, told Reuters that the bank doesn't include non-disparagement clauses and releases of claims in the course of ordinary loan modifications – just in ones involving negotiated legal settlements. He added that waivers don't preclude customers from filing suits on post-settlement issues.
Marcey Zwiebel, vice president of external communications, told Reuters that ‘these clauses are part of the consideration we receive for agreeing to settle the case. This helps to ensure that the discussion is not re-opened in public after the case has been settled.’
For more, check out the Reuters report.