If you purchase a mortgage, how can you prove the amount due in a subsequent foreclosure lawsuit? That is the question that is raised in a series of recent Florida court cases.
Proving the amount due at trial is sometimes a difficult task. It is unlikely that a witness will be able to testify of his or her own knowledge how much is due. More likely, the witness will rely on written payment records. However, payment records are considered hearsay, which is generally inadmissible in court.
There is an exception to the hearsay rule for business records. In order for the exception to apply, the witness must testify that:
1) the payment record was made at or near the time of the payment;
2) the record was made from information provided by a person with knowledge of the payment;
3) the record is kept in the ordinary course of a regularly conducted business activity; and
4) it was a regular practice of the business to make such a record.
That may not be difficult to prove when the witness works for the servicer that made the records, but what if the payment records are the records of a prior servicer that have become part of the new servicer’s records? Can the witness testify as to the prior servicer’s payment records?
In Sas v. Fannie Mae, 40 Fla. L. Weekly D 1361 (Fla. App. 2d Dist. 2015), the appellate court said yes, in some cases. The court said the payment history of the prior servicer is admissible if the new servicer’s witness testifies that the new servicer independently verified the accuracy of the prior payment history and that its verification procedures demonstrate the prior servicer’s records were trustworthy. In Sas, the subsequent servicer went through the files at the time the loans were purchased, checked for anything that seemed out of line in the payment histories, and then made contact with the borrower. The court found that verification to be sufficient. A similar result was had in Nationstar Mortgage, LLC v. Berdecia, 40 Fla. L. Weekly D1502a (Fla. App. 5th Dist. 2015).
In Channell v. Deutsche Bank, 40 Fla. L. Weekly D1467a (Fla. App. 2d Dist. 2015), the court found on different facts that the prior servicer’s records were not admissible. The court noted that the servicer’s witness offered no testimony as to whether the prior servicer’s records were verified for accuracy at the time the prior servicer’s records were integrated into the new servicer’s records.
Thus, it appears that a review and verification of existing payment records for accuracy is an essential part of purchasing a mortgage loan. There may be other ways to prove the amount due besides the methods described in these cases, but those other methods will likely involve calling witnesses from the prior servicer, which is a much more difficult and expensive task. The preferable approach, then, is to make sure the purchaser of the loan does the necessary due diligence at the time the loan is acquired.
