Archive for September 17th, 2011

Making Banks Prove Their Case

Many homeowners wonder how a foreclosure defense attorney can help when they’re behind on monthly mortgage payments.  If I had to explain what I do, and how I help, in just one sentence, it would be this: 

I force the banks to prove their case.

That may sound simple, but if it were, then why are banks so reluctant to go to trial?  Why do contested cases take so long for banks to prosecute?  And when these cases do approach trial, why do banks often dismiss them voluntarily? 

Many consumer advocates think the banks are trying to hide something truly nefarious, and in some cases, that may be.  More often, though, I think the explanation is more simple – banks struggle to prove an entitlement to foreclose because they lack the requisite evidence. 

A wonderful illustration of this is seen in the recent decision by Florida’s Fourth District Court of Appeal in Glarum v. LaSalle Bank. In that case, the homeowner admitted he was in default on mortgage payments but disputed the amount owed.  As so frequently happens in foreclosure lawsuits throughout Florida, the bank filed an affidavit in support of a motion for summary judgment, asserting the amount owed exceeded $340,000 (based on data entries in the bank’s computer system).  The lower court granted that motion, agreeing the bank was entitled to foreclosure.  The appellate court (the Fourth District) reversed, ruling the bank’s evidence – the affidavit – was insufficient to establish a right to foreclose as a matter of law. 

In support of its ruling, the Fourth District began with the basic proposition that affidavits and other information used for summary judgment must be admissible in evidence, just as if it were a trial.  See Fla.R.Civ.P. 1.510(c).  The court then concluded the affidavit was not admissible, and not a basis upon which to grant foreclosure, because, in its words:

[the person who signed the affidavit] did not know who, how or when the data entries were made into Home Loan Service’s computer system.  He could not state if the records were made in the regular course of business.  He relied on data supplied by Litton Loan Servicing, with whose procedures he was even less familiar. [The person who signed the affidavit] could state that the data in the affidavit was accurate only insofar as it replicated the numbers derived from the company’s computer system.  Despite [his] knowledge of how his company’s computer system works, he had no knowledge of how that data was produced, and he was not competent to authenticate that data.  Accordingly, [his] statements could not be admitted under section 90.803(6)(a) [the business records exception to the hearsay rule] and the affidavit of indebtedness constituted inadmissible hearsay. 

Without an admissible affidavit, the Fourth District concluded the bank was not entitled to a foreclosure and reversed the lower court’s Final Judgment of Foreclosure. 

If this sounds complicated, think about it this way.  Courts don’t determine the outcome of lawsuits based on information from people who lack personal knowledge of the facts at issue in the lawsuit.  For example, I couldn’t go testify as a witness at a trial and say “I didn’t see the car accident, but my friend told me the driver of the blue car ran the red light, and here are medical bills showing the amount of the victim’s medical expenses.”  It simply doesn’t work that way.  My friend would need to testify to what he saw at the accident scene, and the victim or his doctors would need to provide the proof of the medical expenses. 

The situation in foreclosure cases is no different (and, fortunately, the Fourth District did not apply a different set of rules simply because this was a foreclosure case).  To establish the amount owed on a note/mortgage, the bank must introduce admissible evidence.  Again, this sounds easy, but Glarum shows how this can be a huge problem for banks. 

Think about it this way.  We all know that, in the vast majority of foreclosure cases, the bank that’s suing wasn’t the original owner/holder/servicer of the mortgage.  Consequently, the bank that’s suing can’t simply go into court and say “this is how much the homeowner owes us” without relying on some sort of documents from the prior bank(s)/servicer(s).  In other words, as Glarum explains, an employee of the current bank can’t just say “this is what the prior bank told us was owed” or “this is what our computer system says the prior bank was owed.”  To prove its case, the current bank would need to introduce evidence from an employee of that prior bank (showing the amount owed), or, at minimum, introduce evidence from an employee of its current bank establishing some sort of legitimate procedure as to how the amount from the prior bank was input into its computer. 

As a practical matter, this sort of thing never happens.  Banks rely on their own employees to win a foreclosure case – they don’t want to have to track down information from employees of other banks.  Heck, sometimes the banks can’t do this, even if they wanted to, because the prior bank(s) no longer exist and/or the current bank doesn’t even know who the prior bank(s) were.  (Wouldn’t it be an awesome irony if the MERS system kept banks from proving their cases because they didn’t know which banks owned the notes/mortgages previously and didn’t know who to contact to obtain admissible evidence?)

Lest you doubt this is a huge problems for banks, check out this posting from one of Florida’s foreclosure mills.  They’re running scared from the Glarum opinion, desperately trying to sway judges to change this decision due to the negative consequences it would have on banks’ ability to prosecute foreclosures.  In other words, the banks want the courts to apply a different set of laws to foreclosure cases because if the law is followed, and banks are made to prove their entitlement to foreclosure with admissible evidence, they will struggle to do so. 

Back to my original point.  In its simplest form, foreclosure defense lawyers force banks to prove their case – to prove their entitlement to foreclosure.  Often, as you’ve seen here, that’s harder to do than you’d think, and that’s why a competent defense lawyer, who is able to point out the flaws in the bank’s evidence at each stage of a foreclosure lawsuit, is so important. 

Mark Stopa

Posted in Main | 2 Comments »