Apparently some mortgage servicers were requiring borrowers to hold their criticism in exchange of loan modifications, but a public official has put a stop to that, and you may freely express your opinions and still get your lender to cooperate when you are in financial shambles.

Ocwen Financial, a Mortgage Servicer, required some homeowners to withhold their negative opinions about the company through the internet in exchange of loan modifications. But public official Benjamin Lawsky, New York state banking regulator, required the company to no longer seek gag rules in exchange for a settlement agreement with its department, New Yorks Department of Financial Services.(1)

Ocwen, an Atlanta based company, is one among a number of companies who have required troubled borrowers to hold their criticism. Other companies include Bank of America and PNC Financial Services. You may be asking yourself what is the legal term for this request? A non-disparagement clause in a contract; in this case, in the contract to modify a loan.

For you borrower, this means that you may rant about your lender. But before you do that, you should read a research paper by Jonah Berger, Alan T. Sorensen, and Scott J. Rasmussen, students of the Stanford Graduate School of Business, who found that sometimes negative reviews increase sales by increasing awareness.(2) The paper begins by acknowledging that yes, negative publicity has hurt major companies throughout history. Some of the examples cited by the paper include the McDonalds case in which a rumor that the company used worm meat in its hamburgers temporarily cost the company a loss of 25% in sales. Yet, there are cases in which negative publicity resulted in an increase in sales; particularly with unknown products and companies.

Do you remember the movie Borat? This goofy guy made fun of Kazakhstan in every possible way, and despite the public condemnation of the movie, the website hotels.com reported a 300 percent increase for information on the country. Other findings include cases when the New York Times gives a negative review to a little known authors, sales of the book increased.

The study used a combination of econometric analysis and experimental methods that confirm negative information about little known products/companies increases sales because negative information increase awareness about these.

Of course I dont want negative reviews, who does? But what else can we say after an industry peer does such a terrible mistake? Fortunately, an Ocwens spokesperson communicated the non-disparagement clauses were part of less than 1% of loan modification contracts in its portfolio, and the clauses will not be enforced for all those who agreed to the terms.

1) http://www.reuters.com/article/2014/06/03/us-banks-mortgages-idUSKBN0EE1XG20140603

2) http://www.ssc.wisc.edu/~sorensen/papers/negative_publicity_2010.pdf

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