Hearsay Rule Defined

The hearsay rule and exceptions to it are deceptively simple. It is the application of the rule and exceptions that are complicated.

The bottom line is that companies posing as servicers may not produce a witness to provide testimony that is the foundation for introduction of documents if the company was not directly involved in creating the data entries and physically handling the documents that are proffered in court.

Such witnesses might say that the entries were made in the ordinary course of business.  And that might be true as to someone. But unless the entries were made by employees of the “servicer,” that testimony must come from an employee of the company who did receive the money and who did make the entries based upon its receipt of the money.

Investment banks are in control of this anrrative but you don’t have to let them keep control. When homeowners receive an unsigned letter declaring that there is a new servicer in town, they are not receiving communication from an identified creditor. The appropriate response is a QWR or DVL.

Business records are not automtic exceptions to the hearsay rule unless the testimony reveals that the records were created by the company that is proffering those records as business recoreds. In the context of the hearsay rule of evdience, they are not business records if they are reports on the data entries made by third parties. Only those third parties can claim the exception.

The rules of evidence prohibit statements made out of court from being introduced as evidence that something is true. Such statements are defined as hearsay. Definition. Hearsay is an out-of-court statement offered to prove the truth of whatever it asserts.

So for example, if a party contends that the traffic light was green, then that party may not introduce in evidence the fact that someone outside the courtroom, who is not subject to cross-examination, said that the light was green. It is not admissible and if that is all the evidence you have your claim or defense fails.

This is relevant in foreclosure cases because the entire case usually rests on the evidence from a company claiming to be a servicer and the usual mistake made by everyone is to assume that they are a servicer.  This illusion is created carefully using repetition as you would use in training a dog.

The company claiming to be a servicer tells you that they’re the servicer, but they usually don’t tell you who is their employer — i.s. a creditor who has paid value for the underlying obligation that they contend exists.

And they certainly don’t send you an original notice from the party who will later be designated as a creditor. But that is exactly what is required under law. Consumers have been warned for centuries to not respond to demands for payment from a “collector” or “servicer” unless the creditor directs them to do so. It’s common sense. but common sense is thrown to the winds in virtually all mortgage cases, whether contested or not.

By repeatedly sending out letters and notices the investment bank, acting through intermediaries, and using the name of the implied “servicer,” creates several impressions that can only be discarded after the viewer takes several steps back and says “Wait a minute! Something is not quite right!”

Those notices do not actually start with the named “servicer”. They are originated, usually unsigned, in the server of a computer that is owned, controlled and maintained by a third party like CoreLogic. And CoreLogic is not acting for the “servicer.” It has no contract to do so. Its allegiance and control are owed to an investment bank that is never disclosed as a party in interest, but who will get the full proceeds of any forced sale of property — even though they’re not a creditor of the homeowner. This is the essence of nearly all foreclosure actions.

When homeowners send payments, they direct the delivery of a check or they direct the electronic payment to allocation or account that bears the name of the self-proclaimed servicer. But the actual deposit is made into an account that is owned and controlled by a third party who is not subject to the control of the self-proclaimed servicer. That third party is working for the undisclosed investment bank.

So the hearsay analysis is as follows: just because an unauthorized company sent you notices on where and how to pay does not mean that you should or are required to do so. That would only be true if the clearly identified creditor gave you a signed authorized notice to make such payments to anyone other than the creditor. And just because your thought you were paying the faux servicer does not mean you were paying the faux servicer.

Unless there is a bank account owned and operated by the self-proclaimed servicer into which they deposit money from homeowners and make disbursements to creditors, there is no “servicing” by the faux servicer. That means that no officer, director employee of the company posing as servicer has actually handled or is responsible for depositing or accounting for payment made by homeowners (regardless of whether they’re actually due or not).

Many homeowners have won the day because they simply objected to the foundation or testimony or affidavit. They were not seeking to prove that the debt did not exist or that there was no authority. They were seeking to block the ability of the foreclosure mill lawyer to present a case within the bounds of legally admissible evidence. The reasons why such challenges ultimately succeed if the homeowner is persistent are actually not relevant unless the homeowner chooses to file a lawsuit seeking damages for abuse of process, wrongful foreclosure, slander of title etc.

There are two ways that investment banks are successful in proffering inadmissible evidence under the business record exception to the hearsay rule:

  1. The homeowner waives any objections and contributes to the illusion.
  2. The homeowner fails to challenge the existence and ownership of the supposed debt and the authority to administer, collect or enforce it.

Practice Note: remember that the object is to win. The homeowner wins if the case against the homeowner collapses — not by attempting to prove things that will never be corroborated in discovery because they will in all events refuse to answer. Also, note that a “Payment History” is not the loan account unless the records produced show receipts and disbursements. Such a report is only a report on what someone else recorded for their own reasons.


Nobody paid me to write this. I am self-funded, supported only by donations. My mission is to stop foreclosures and other collection efforts against homeowners and consumers without proof of loss. If you want to support this effort please click on this link and donate as much as you feel you can afford.
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Neil F Garfield, MBA, JD, 74, is a Florida licensed trial and appellate attorney since 1977. He has received multiple academic and achievement awards in business and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.

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