HEARSAY OBJECTION AND LACK OF FOUNDATION: How Lockbox and Separate Processing Agreements Divert Money and “Servicing” Functions to Undisclosed Third Parties Acting on Behalf of the Investment Bank Who Originated the Transaction with the Homeowner.

From LoanDepot quarterly report, 2022: The Company derives income primarily from gains on the origination and sale of loans to investors, income from loan servicing, and fees charged for settlement services related to the origination and sale of loans.

Not one word about revenues or profits arising from the receipt of principal and interest from borrowers.

But people who have done business with Loan Depot (and there are thousands of them) all think they borrowed money from Loan Depot. So when they see a document purpotedly endorsed or assigned from Loan Depot, it make sense. But it is a lie.

Homeowners can get the upper hand if they are willing to look the gift horse in the mouth.

Hat tip to “Eleanor” for providing a copy of a sample lockbox agreement that references and incorporates other agreements’ terms, including processing agreements. Note the language that says that the lockbox contractor is NOT acting as an agent for anyone.

As you will see below, this is why the CFPB in MAy, 2022 reclassified financial technology companies as “servicers.” Their accompanying statement reveals that they consider these companies to be the “real servicers” (my words, not theirs).

The significance of this could not be overstated for courtroom strategies and tactics.

If the witness works for XYZ servicer and XYZ Servicer does not perform any functions relating to emittances, it cannot produce a record of its business relating to receiving those remittances.

Therefore there is no other way to construe the proffered “Payment History” as hearsay that is NOT a business record. It is not a record of any business done by XYZ Servicer.

As such, the Payment History can be and is routinely excluded in favor of the homeowner who makes timely and proper objection on the grounds of hearsay and foundation.

But absent the objection and the ruling, the history is not only admitted into evidence but also can be used to raise the presumption that the unpaid loan account exists and that the payment history is an accurate rendition of the balance due on the books and records of the named creditor, Plaintiff or Beneficiary — none of which is true.

The moral of the story is that litigators should be prepared with their objections and have case law and even a memorandum of law in support of the objection.

A key and critical follow-up is the motion to strike all testimony and exhibits that were introduced on direct examination. The same logic can be used as a motion to strike the affidavits in support of a Motion for Summary Judgment etc.

Note also how there is no provision for what happens if the lockbox and other independent financial technology companies fail to perform according to the terms and conditions of the agreement or in accordance with customs and practices in the banking industry.

Here are some relevant quotes from the sample lockbox agreement I received:


3. Customer Remittances. Obligors of the Receivables will be directed by AmeriCredit to forward their remittances to Processor at a post office address (the “Lockbox”) assigned by Processor. Processor, acting for the exclusive benefit of the Trustee, shall have unrestricted and exclusive access to the mail directed to this address. AmeriCredit agrees to notify Processor thirty (30) days in advance of any change in Obligor remittance statements and/or mailing schedule.

4. Collection of Mail. Processor will collect mail from the Lockbox at regular intervals each business day, but not less than two times daily.

5. Endorsement of Items. Processor will process, on behalf of AmeriCredit, checks and other deposited items that appear to be for deposit to the credit of AmeriCredit or its Affiliates in accordance with Processor’s Lockbox Processing Agreement and Instructions, or other applicable agreement and related service terms (individually and collectively, the “Processor Documentation”), as appropriate.


6. Credit of Funds to Account.

(a) Processor will process the checks and other deposited items and credit the total amount to the account described below (the “Lockbox Account”). The Lockbox Account will be established at JPMorgan Chase Bank, N.A. (ABA No.: 122100024) as account number 976484519. The Lockbox Account will be maintained and all banking functions will be provided by JPMorgan Chase Bank, N.A.

(b) Unless otherwise directed by the Trustee, AmeriCredit agrees that all collected funds on deposit in the Lockbox Account shall be transferred from the Lockbox Account within two Business Days by wire transfer in immediately available funds to the following account: Wells Fargo Bank, National Association, Account No. 0001038377 f/b/o 66117601; ABA No. 121000248 (the “Collection Account”).

7. Processor Documentation. This Agreement supplements, rather than replaces, the Processor Documentation, terms and conditions, and other standard documentation in effect from time to time with respect to the Lockbox or the services provided by Processor in connection therewith. The Processor Documentation will continue to apply to the Lockbox and such services, and the respective rights, powers, duties, obligations, liabilities and responsibilities of the parties thereto and hereto, to the extent not expressly conflicting with the provisions of this Agreement (however, in the event of any such conflict, the provisions of this Agreement shall control). Prior to issuing any instructions, the Trustee shall provide Processor with such documentation as Processor may reasonably request to establish the identity and authority of the individuals issuing instructions on behalf of the Trustee. The Trustee may request the Processor to provide other services with respect to the Lockbox; however, if such services are not authorized or otherwise covered under the Processor Documentation, Processor’s decision to provide any such services shall be made in its sole discretion (including without limitation being subject to AmeriCredit and/or the Trustee executing the Processor Documentation or other documentation as Processor may require in connection therewith).

8. Processor’s General Duties. Notwithstanding anything to the contrary in this Agreement: (i) Processor shall have only the duties and responsibilities with respect to the matters set forth herein as is expressly set forth in writing herein and shall not be deemed to be an agent, bailee or fiduciary for any party hereto; (ii) Processor shall be fully protected in acting or refraining from acting in good faith without investigation on any notice, instruction or request purportedly furnished to it by AmeriCredit or the Trustee in accordance with the terms hereof, in which case the parties hereto agree that Processor has no duty to make any further inquiry whatsoever; (iii) it is hereby acknowledged and agreed that Processor has no knowledge of (and is not required to know) the terms and provisions of the Sale and Servicing Agreement referred to in Section 1 above or any other related documentation or whether any actions by the Trustee, AmeriCredit or any other person or entity are permitted or a breach thereunder or consistent or inconsistent therewith; and (iv) Processor shall not be liable to any party hereto or any other person for any action or failure to act under or in connection with this Agreement except to the extent such conduct constitutes its own willful misconduct or gross negligence.

9. Processing of Items. The provision of services shall be governed by the Processor Documentation or other applicable agreements and related service terms, as may be




amended from time to time, subject to the prior written consent to any such amendments of a material nature by the Trustee and AmeriCredit, which consents shall not be unreasonably withheld, conditioned or delayed.

10. Trust Correspondence. Any envelopes collected from the Lockbox which contain correspondence and other documents (including, but not limited to, certificates of title, tax receipts, insurance policy endorsements and any other documents or communications of or relating to the Receivables) will be sent to the Servicer at its current address. Any enclosed payment(s), coupon(s) or check(s) will be processed and deposited by Processor in accordance with the provisions of the Agreement.


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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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But challenging the “servicers” and other claimants before they seek enforcement can delay action by them for as much as 14 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).

Yes you DO need a lawyer.
If you wish to retain me as a legal consultant please write to me at neilfgarfield@hotmail.com.

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