Its CEO, Terry Laughlin, is a former head of the Merrill Lynch Global Bank Group. A list of the firm's other investors includes several private equity firms as well as billionaire investor and philanthropist George Soros, Dell founder Michael Dell and subprime mogul John Paulson. (Many of OneWest's investors worked at Goldman Sachs at some point in their careers, and have made lucrative careers out of buying distressed assets.)
Experts say private equity firms are making a killing in this economy, as they buy failed assets at huge discounts, and then resell what they can at a profit.
"Financially, this is relatively smart, but ethically it's challenging," said Josh Kosman, author of "The Buyout of America: How Private Equity Will Cause the Next Great Credit Crisis."
"There's no long-term interest for OneWest in bailing out these people in Patchogue," he said.
OneWest disagrees with the judge's ruling and says it plans to appeal the decision.
"We respectfully disagree with the lower court's unprecedented ruling," the bank said in a written statement. "The law does not authorize a judge to cancel a borrower's loan obligation because he did not like the way loan modification discussions were handled."
Lawyers say the ruling is likely to be overturned on appeal and is unlikely to set a precedent for other homeowners around the country.
"The judge knows darn well that this is going to get overturned on appeal, but he's sending a message," said Mory Brenner, a Massachusetts foreclosure specialist, explaining that letting the decision stand would encourage homeowners around the country to fight to have their mortgages canceled. "As much as I would like to see homeowners helped, this would set a horrendous precendent because it means the government gets to undercut the mortgage contract."
ABC News' Ed Fabry contributed to this report.