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see AppellateOpinion Holt v Calchas 4th DCA decision

The clear assumption in this case is that Wells Fargo had stepped into the shoes of the lender and that if Wells Fargo did not win or if its surrogate did not win, it was assumed that the homeowner would be getting a free house, a free ride and a windfall at the expense of Wells Fargo Bank. Despite years of articles and treatises written on the subject, the courts have still not caught up with the basic fact that both the lenders and borrowers were victims of an illegal and fraudulent scheme. At the very least, the court owes it to our society and to all parties involved in foreclosure litigation, to enforce the laws that already exist —  especially the rules concerning the burden of proof in a foreclosure action.

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The Holt decision is a curious case. There are a number of unique factors that occurred in the trial court and again in the appellate court. The first judge recused herself shortly into the trial and was replaced by a senior judge. There is no transcript of the proceedings prior to the point where the senior judge took over. At the same time the homeowners attorney was also replaced. So my first question is how anyone could have reached any decision. In the absence of the transcript of the proceedings leading up to the recusal of the original judge I find it troublesome that either the judge or the attorney for the homeowner could come to a decision or develop any trial strategy or theory of the case for the defense of this foreclosure case.

The second thing that I have trouble with is that the homeowner filed the appeal based on three different theories, to wit:

(1) the proffered promissory note, mortgage, and assignment of mortgage should not have been admitted into evidence—  an argument that the appellate court rejects;

(2)  the homeowner’s motion to dismiss should have been granted for failure to prove compliance with paragraph 22 [default, reinstatement and acceleration] of the mortgage —  with which the appellate court agreed. Since the appellate court agreed with this point and reversed the trial court it would seem that the case should have been dismissed, but instead the 4th District Court of Appeal chose to remand the case for further proceedings thus giving a second bite of the apple to the party who was claiming the right to foreclose —  despite the finding that the trial was over and on appeal and the foreclosing party had failed to make its case. If the homeowner had failed to prove its defenses, would the appellate court have issued legal advice to the homeowner and remanded for another bite at the apple?

(3)  the payment history should not have been admitted into evidence over the hearsay objection raised by the homeowner. The court goes into great lengths essentially tying itself into knots over this one, but eventually sides with the homeowner. Instead of ordering the entry of judgment for the homeowner, the court remanded the action for further proceedings in which the foreclosing party, having received legal advice from the District Court of Appeal, is now permitted to retry the case to fill in the blanks that the appellate court had pointed out with great specificity and particularity.

While I agree with much of the reasoning that is stated in this appellate decision, I still find it very troublesome that there remains an assumption and perhaps even a bias in favor of the foreclosing party. This is directly contrary to the rules of court, common law, and statutory law. The party bringing a claim for affirmative relief (like foreclosure) must bear the burden of proving every element required in their cause of action. This is not a motion to dismiss where every allegation is taken as true. At trial, it is the opposite — there is no case for the homeowner to defend unless the foreclosing party establishes all elements of its right to foreclose. If they fail to do so, the other side wins. In the interest of justice as well as finality courts do not easily allow either side to have another trial unless there are exceptional circumstances.

(In non-judicial states, this is particularly perplexing — the homeowner is required to sue for a TRO (temporary restraining order). In actuality the homeowner probably should have sued immediately upon the notice of the purported “substitution of trustee.” But the point is that the homeowner is required to prove a negative as the non-judicial statutes are construed. What SHOULD happen is that if the homeowner sues for the TRO and objects to the notices filed, challenges the standing of the “new” beneficiary on the deed of trust, and otherwise denies the elements of a foreclosure action, then the parties should be realigned with the new beneficiary required to plead and prove its standing, ownership and ability to prove the default and the balance owed.)

The next thing I find potentially troublesome is that the tactic of inserting a new entity as plaintiff or as servicer in order to shield the actual perpetrator was clearly employed in this case, although it seems not to have been mentioned in the trial court or on appeal. In this case an entity called Consumer Solutions 3 LLC was substituted for Wells Fargo. Then Wells Fargo was substituted for Consumer Solutions. This is a game of three card monte in which everyone loses except for the dealer — Wells Fargo.

As long as they are going back to trial, it would seem that the homeowner would be well served to do some investigations into the parties, and to determine what transactions if any had actually occurred. If there were no transactions, which I think is the case, then any paperwork generated from those fictitious transactions would be completely worthless, lacking in any foundation and could never be enforced against anybody —  with the possible exception of a holder in due course.

 BUSINESS  RECORDS EXCEPTION:

I am continually frustrated by the fact that most people simply do not consider the elements of the business records exception to the hearsay rule within the context of why the hearsay rule exists. By its very nature hearsay tends to be untrustworthy, untested and usually self-serving. That is why the rule exists. It bars any document or testimony offered to prove the truth of the matter asserted unless the person who spoke or wrote the words is present in court to be cross examined as to their personal knowledge, whether they had an interest in creating one appearance or another,  or whether the entire statement could be impeached.

Instead most people on all sides of foreclosure litigation seem to think that the business record should be admitted into evidence unless there is a compelling reason to the contrary. This is incorrect. And if you just scratched the surface of any of these claims you will find that the party who is seeking to introduce these hearsay statements into evidence has a vested interest in the outcome of the case and absolutely no direct knowledge of any of the facts of the case.

Like Chase Bank does with SPS, Wells Fargo has inserted this entity that is essentially run by a hedge fund (Cargill) to prevent any employee or contract party from testifying on behalf of Wells Fargo, because Wells Fargo knows that it has already been sanctioned millions of dollars for telling lies in court.

So instead they have somebody else come in to tell the lies, and that witness is trying to say that they are familiar with the record-keeping of their own company which includes the record-keeping of the previous company, Wells Fargo. Consumer Solutions is a shame shell that never did anything but rent its name for foreclosures while its parent, Cargill, received compensation  (a piece of the pie) for doing nothing.

This obvious ploy has worked for nearly a decade but is coming under increasing scrutiny — with Judges musing out loud about the shuffling of “servicers” and “lenders” and creditors. In an effort to stifle any real challenge to foreclosures courts have often held that the securitization documents are “irrelevant.”

So the courts take jurisdiction over the action and the parties by virtue of claims of securitization, authority allegedly granted by a pooling and servicing agreement, and ownership “proven” merely by claiming it on the basis of self-serving fabricated documents not subject to scrutiny, and a default and balance that excludes the payments received by the creditors from servicer advances and other third party payments paid without right of subrogation.

Then the courts limit discovery, overrule objections and allow the party initiating foreclosure to “prove” its case by using dubious legal “presumptions” instead of facts, most of which were denied by the homeowner.

And now that the Wall Street banks perceive a risk in having real people with real knowledge testify, because they might admit or testify to things that might hurt them, they insert a complete stranger to the process and double down on “business record exception” to get paperwork into evidence, much of which is completely fabricated and nearly all of which contains errors in computation by exclusion of (a) the fact that the creditors were paid every payment despite the declaration of default by the “servicer” and (b) deducting those payments from the original debt owed to those investors who advanced funds for the origination or acquisition of “loans.”

In the Holt decision the 4th DCA declares that the assignment was properly allowed into evidence because it was a “verbal act” and not offered to prove the truth of the matter asserted. Once in evidence however, the contents were taken as true shifting the burden of proof to the homeowner who was stone walled in discovery. The homeowner in many cases is not allowed to compel the production of evidence of payment or consideration for the assignment — without which the assignment is merely an empty document conferring no rights greater than the assignor had at the time of the alleged “assignment”. Most often the assignor did not require payment for the simple reason that they too had no money in the deal.

PAYMENT  HISTORY HEARSAY OBJECTION

The court inserts Florida Statute 90.803(6)(a), which is part of the evidence code, providing for exceptions to the hearsay rule for business records. In that statute is the general wording for the types of records that might qualify for the exception. But the court completely ignores the last words of that statute — “unless the sources of information or other circumstances show lack of trustworthiness.” (e.s.)

The question is why should we trust a servicer or its “professional witness”? The witness is there and was often hired for the sole purpose of testifying in foreclosure trials. If they lose, they risk their jobs. The “servicer” whether they are designated in the PSA or have been slipped in as another layer of obfuscation, has an interest that is in conflict with the the actual creditors — recovery of “servicer advances” (which were paid from funds provided by the Master Servicer — often the underwriter and seller of mortgage bonds to investors) and to make more money because they are allowed to collect a vast amount of “fees” for enforcement of a “non-performing” loan.

The fact is that the servicer advances negates the default and might give rise to a new cause of action for unjust enrichment against the homeowner but that claim would not be secured. This in turn leads to the unnatural conclusion of aggravating the the alleged damages by forced sale of the property as opposed to modification and reformation of the loan documents to (a) name the true creditor and (b) use the true balance owed to the creditors.

Thus both the specific witness and the company he or she represents have a vested interest in seeing to it that the foreclosure results in a forced sale for their own benefit and contrary to creditors who have no notice of the pending action. At the very least, this certainly raises the question of trustworthiness. Add to that the fraudulent servicing practices, the lies told during the “modification” process, and I would argue that the source and circumstances raise a presumption that the testimony and business records not trustworthy.

Quoting Florida Statute 90.803(6)(a) the court goes not to set forth the elements of the business records exception — the issue being that ALL elements must be met, not just some or even most of them:

1. The record was made at or near the time of the event [so in many cases where SPS was inserted as the “servicer” when in fact it was merely an enforcer without knowledge of prior events, it is impossible for the records of SPS  to contain entries that were made at or near the time of any relevant event].
2.  the record was made by or from information transmitted by a person with knowledge [ if the court permitted proper discovery, voir dire, and cross examination is doubtful that any witness would be able to testify that the record was made by a particular person who had actual knowledge]
3.  the record was kept in the ordinary course of a regularly conducted business activity [ while it might be true that the actual servicer could claim that it’s records were in the ordinary course of a regularly conducted business activity, it is not true where the witness is a representative of a “new” servicer for plaintiff —  neither of whom were processing any data concerning the loan from the moment of origination through the date that the foreclosure was filed]
4.  that the record was a regular practice of that business to make such a record [ here is where the courts are in my opinion making a singular error —  by accepting proof of only the fourth element required for the business records exception, trial court and appellate courts are ignoring the other elements and therefore allowing untrustworthy documents into evidence.  “While it is not necessary to call the individual who prepared a document, the witness to open a document is being offered must be able to show each of the requirements for establishing a proper foundation.” Hunter v  or Aurora loan services LLC, 137 S 3d 570 (Fla 1st DCA 2014).

The Holt Court then goes on to analyze several cases:

1. Yisrael v State 993 So 2d 952, 956 (FLA 2008) — a Florida Supreme Court decision quoting the elements of the business records exception. see sc07-1030
2. Glarum v LaSalle Bank, N.A. 83 So 3d (Fla 4th DCA 2011) — where the witness was unable to lay the proper foundation for the business records exception  because the witness testified that he “did not know who, how, or when the data entries were made into [ the previous mortgage holders’] system and he could not stated the records were made in the regular course of business.” ( My only objection to this is the wording that was used. The predecessors in the document chain are referred to as “mortgage holders” —  indicating an assumption which is probably not true). see Glarum v. LaSalle
3. Weisenberg v Deutsch Bank N.A. 89 So 3d 1111 (FLA 4th DCA 2012) — Where the court held that “the deposition excerpts show that [the witness] knew how the data was produced and her testimony demonstrated that she was familiar with the bank’s record-keeping system and had knowledge about data is uploaded into the system.” (My problem with the Weisenberg decision is that the word “familiar” is used generically so that the witness is allowed to testify about the business records — without any personal knowledge about the trustworthiness of the data in those records — again with the apparent assumption that the foreclosing party SHOULD win and the second assumption being that the homeowner should not be allowed to take advantage of hairsplitting technicalities to get a free house.  In fact it is the servicer that is taking advantage of such technicalities by getting business records into evidence without verification that those are all the business records. For example, the question I often ask is who did the servicer pay after receiving payment from the borrower or anyone else? The records don’t show that — thus how can the court determine the balance on the creditor’s books and records? The underlying false assumption here is that the servicer records ARE the creditor’s records even though the creditors have not even been identified.)
4. WAMCO v Integrated Electronic Environments 903 So 2d 230 (Fla 2d DCA 2005) —  Where another appellate court held that “a document which contains the amount of money owed on the loan was admissible under the business records exception even where the testimony as to the amount owed was based on information from a bank that previously held the loan.” (I think this decision was at least partially wrong. The witness testified that it was part of his duties to oversee the collection of loans that the bank urges and the initial members he used his calculations were provided by the previous bank.  In my opinion the court properly concluded that the witness to testify —  that he should have been limited to the business records of the company that employed him. Witness knew nothing about the previous bank practices and did not employ any verification processes. see 2D04-2717
5. Hunter v Aurora Loan Services 137 So 3d 570 (Fla 1st DCA 2014) — where the witness was incompetent to testify and could not lay a proper foundation for the business records exception and in which the HOLT Court quotes from the Hunter decision with obvious approval:  “At trial, a witness who works for the current note holder, but never worked for the initial note holder, attempted to lay the foundation for the introduction of records pertaining to prior ownership and transfer of the note and mortgage as business records. The witness testified that based on his dealings with the original note holder, the original note holders business practice regarding the transfer of ownership of loans was standard across the industry. He could not testify, based on personal knowledge, who generated the information. He also testified, in general fashion and without any specifics, that some of the documents sought to be introduced were generated by a computer program used across the industry  and that records custodian for the loan servicer was the person who usually it puts the information obtained in the documents. The trial court admitted the documents into evidence.” see hunter-v-aurora-loan-servs-llc

The most interesting quote from the Hunter decision is “absent such personal knowledge, the witness was unable to substantiate when the records were made, whether the information they contain derived from a person with knowledge, whether the original note holder regularly make such records, or indeed, whether the records belong to the original note holder in the first place. The testimony about standard mortgage industry practice only arguably established that such records are generated and kept in the ordinary course of mortgage loan servicing.” 

Filed under: foreclosure | Tagged: assignment, business records exception, Cargill, Chase, consumer solutions 3 LLC, evidence code, Florida, Florida statute 90.803(6)(a), GLARUM V LASALLE, hearsay rule, Holt decision WAMCO decision, HUNTER V AURORA, Payment history hearsay objection, Servicer advances, SPS, TRUSTWORTHINESS, verbal act, WAMCO V INTEGRATED, WEISENBERG V DEUTSCH, Wells Fargo, YISRAEL V STATE | 7 Comments »