The bottom line and the importance of this analysis is that the basis for any claim in foreclosure is the enforcement of an unpaid debt and the proof of its existence and status, along with the proof of a default.
You must understand that a default does not exist because of nonpayment nor because someone (anyone) declares a default. It exists only if the nonpayment caused a financial loss to someone.
Understanding the business records exception to the hearsay rule enables competent trial lawyers to block evidence or proof of the claim. In such cases, the homeowners nearly always win.
Last night on the Neil Garfield Show, I devoted the entire show to one simple premise. The reports currently being used by lawyers prosecuting foreclosure claims are neither records nor business records. As such, they are NOT admissible evidence.
The emphasis here is on the “payment history” but it also applies to all correspondence, notices, and statements sent out under the name of a company that has been designated and named as “the servicer” without any statement from the supposed creditor.
The foundation for my analysis is that if the company does not receive, process, and disburse payments, then it has no personal knowledge on which it could enter data. Business records must be a record of the business conducted by the company — not someone else’s business and someone else’s record keeping.
The background for this position is the revelation that there is no evidence that the companies that have been designated as servicers” have been performing any servicing functions. Even checks made out to that company’s name are not received by them, processed by them, or deposited into an account from which they could make disbursements.
So any report they issue regarding such activities is neither credible (they have an interest in the outcome of litigation) nor admissible (hearsay). Those reports are not business records and cannot be used as exceptions to the hearsay rule.
The bottom line and the importance of this analysis is that the basis for any claim in foreclosure is the enforcement of unpaid debt and the proof of its existence and status, along with the proof of default.
You must understand that a default does not exist because of nonpayment. It exists only if the nonpayment caused a financial loss to someone.
Understanding the business records exception to the hearsay rule enables competent trial lawyers to block evidence or proof of the claim. In such cases, the homeowners nearly always win.
On March 8, 2022 Jacob Zahniser of the law firm of Miller Nash LLP, published an article entitled “What do the Rules of Evidence Have to Do With Documenting a Construction Claim? Everything.” It could just as easily be entitled “What do the Rules of Evidence Have to Do With Documenting a Foreclosure claim? Everything.”
Here is a quote from that article:
Defendants petitioned the Oregon Supreme Court to address the issue of what evidence a party must present to establish the business records exception for documents created by third parties.
The Supreme Court held that the party proffering the documents must present evidence of the third party’s record-making practices sufficient to establish that the documents were made contemporaneously with the acts they describe, by (or from information transmitted by) a person with knowledge, as part of a regularly-conducted business activity, and pursuant to a regular record-making practice.
Because the plaintiff failed to present such evidence, the trial court erred in admitting the documents into evidence, remanding for further proceedings.
And here is the reason that analysis is correct. For 20 years the courts have been grappling with the fact that all of the foreclosure players have been either found guilty or agreed to large multibillion-dollar settlements regarding false, fabricated forged documents and misrepresenting the status of alleged loan accounts.
They could have avoided all that litigation if they simply required an officer of the named claimant, plaintiff, or beneficiary to testify about the subject loan account on the books and records of that claimant, showing the account and all its debits and credits to the court.
Instead, they persist in offering a Payment History of a company that has been named as a “servicer” (without any acknowledgment from the claimant) instead of the loan account of the claimant which would show the balance and would show the financial injury to the named claimant (as if they knew anything about the claim).
Various arguments can and are made as to why they persist in such litigation activity. but the plain fact is that there is no legal precedent to accept hearsay evidence as proof of the matter asserted and there is no legal precedent to establish the printout of a report generated by third parties as a business record exception to the hearsay rule.
BACKGROUND ANALYSIS: The argument will always be that that economic loss is implied or otherwise present caused by the complexity of securitization of debt. That is an argument not based in fact (i.e. evdience presented) and it is not the truth.
In foreclosure cases, the sole question is whether an identified creditor has paid for a debt owed by the homeowner in exchange for the contractual obligation to make a payment of interest and principal.
If ANYONE claiming to be a creditor suffers any injury other than the loss attributed to nonpayment, it is not the basis for enforcement because those other injuries were not part of the contract they are seeking to enforce.
In the alternative, if the loss of revenue, bonuses, fee income and other comeptnsation is atrrbuted to the nonpayment of the hoemowner then the opposign aprties are admitting what I have said all aloong, to wit: that the transction needs toe reformed and the hoemwoner is entitled to both the losses AND THE GAINS from the alrger securitizations scheme.
The current playbook of the banks is based on a “heads we win, tails you lose” analysis. That has never been the law. Mutual consideration and reciprocal prmises based on full, fair and hoenst disclsoures has alwayss been the law udner statutes and common law doctrines.
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Neil F Garfield, MBA, JD, 75, is a Florida licensed trial and appellate attorney since 1977. He has received multiple academic and achievement awards in business, accounting and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.
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FORECLOSURE DEFENSE IS NOT SIMPLE. THERE IS NO GUARANTEE OF A FAVORABLE RESULT. THE FORECLOSURE MILLS WILL DO EVERYTHING POSSIBLE TO WEAR YOU DOWN AND UNDERMINE YOUR CONFIDENCE. ALL EVIDENCE SHOWS THAT NO MEANINGFUL SETTLEMENT OCCURS UNTIL THE 11TH HOUR OF LITIGATION.
But challenging the “servicers” and other claimants before they seek enforcement can delay action by them for as much as 12 years or more. In addition, although currently rare, it can also result in your homestead being free and clear of any mortgage lien that you contested. (No Guarantee).
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Neil – all great and good – IF the courts accept this. Hopefully, there are some judges that do and will ACCEPT this. But for most, it is an uphill battle. You still have not explained WHY there is no A/R accounting, and why foreclosure attorneys claim the “TRUST” funded (by claimed investors) – when a “trust” can NEVER directly lend to anyone. The answer is simple and has been avoided for over a decade. And yes, all responsible for not putting forth. That is, the crisis loans were nothing more than reinstatement because the previous loan was already reported in default before the homeowner signed any claimed “current” document that falsely claimed to be a mortgage by which the previous loan was paid off by funding advanced to them. There was NO Funding. No Funding – no A/R. I think this is simpler for courts to understand. PROVE the funding. They can’t. They will recite robo-signed tile recorded docs in counties. THIS is NOT proof of funding.