Archive for June, 2013

Hearsay Objections in Foreclosure Trials

Do you understand when it is appropriate to interpose a hearsay objection in a foreclosure trial?  I watched numerous foreclosure trials in Sarasota today, and I’m convinced most of the foreclosure industry doesn’t know when/how to make a hearsay objection.  Heck, most homeowners don’t even defend their own foreclosure case at trial, much less retain counsel who understands the evidentiary issues at trial.

Explaining all of the circumstances where hearsay applies, as well as its exceptions, is beyond the scope of this blog.  After all, “hearsay” could be an entire class in law school.  That said, there are a few examples worth mentioning, particularly in the context of foreclosure trials.

When you think of a “trial,” you probably think of testimony.  What does “testimony” mean to you?  If you’re like me, when you think of testimony, you probably think of something tangible … something a witness saw with his eyes or heard with his ears.  Perhaps it’s an eyewitness to a car accident explaining “I saw the traffic light; it was red.”  Or perhaps it’s a jailhouse informant in a criminal case testifying “I spoke to the defendant in prison.  He told me he stabbed the victim in the chest.”

This is the classic way testimony is presented at trial – when the witness explains something he saw with his eyes or heard with his ears.  That’s what makes one a “witness” – when he hears something or sees something.

I lay that backdrop because that’s virtually never how it happens at foreclosure trials.  Foreclosure plaintiffs almost always brings one witness to trial, and that witness is almost never a “witness” to anything.  That person didn’t see anything, and that person didn’t hear anything.  Rather, that person typically does little more than act as a records custodian, introducing business records of the plaintiff into evidence.  The plaintiff tries to use these “business records” to prove their entitlement to foreclose.

For example, do you think the witness who comes to trial ever has any personal knowledge of the homeowner being in default?  Or of the amounts allegedly owed?  Of course not.  That witness’s knowledge is based solely on his/her review of the plaintiff’s business records.  Hence, the plaintiff’s ability to prove these issues is predicated on its ability to introduce those business records into evidence.

The Second District explained this concept quite clearly in its May 17, 2013 decision in Sas v. Fannie Mae, Case No. 2D11-6327 (Fla. 2d DCA 2013).  There, the lower court allowed the bank’s witness to testify about the amounts allegedly owed where the witness was testifying not from business records that were admitted into evidence, but from “notes.”  In Sas, the Second District reversed the Final Judgment, explaining ”the trial court abused its discretion in allowing Greenlee to testify over objection about the contents of Fannie Mae’s business records to prove the amount of the debt without having first admitted those business records.”

What is required for a foreclosure plaintiff to establish that documents are “business records” and are admissible into evidence?  Florida Statute 90.803(6)(a) sets forth the requirements:

A memorandum, report, record, or data compilation, in any form, of acts, events, conditions, opinion, or diagnosis, made at or near the time by, or from information transmitted by, a person with knowledge, if kept in the course of a regularly conducted business activity and if it was the regular practice of that business activity to make such memorandum, report, record, or data compilation, all as shown by the testimony of the custodian or other qualified witness, unless the sources of information or other circumstances show lack of trustworthiness.

If the plaintiff can’t satisfy all of these elements of the statute, the documents should not be admitted into evidence.  And as Sas explains, if the documents aren’t admitted, the witness can’t testify from them.  If that happens, guess what that means?  The plaintiff can’t prove its case at trial, and the homeowner prevails.

If you want a specific example, think about the paragraph 22 letters about which I’ve so frequently blogged.  At trial, do you think the witness ever testifies that he/she sent that letter to the homeowner?  Pfft.  Virtually never.  The witness relies on business records.

Typically, the plaintiff tries to establish the Paragraph 22 letter is a business record.  As I see it, though, establishing the letter is a business record under Fla. Stat. 90.803(6)(a) may prove that the letter exists in the plaintiff’s file, but it doesn’t prove the letter was sent.  Unless that witness actually sent the letter (very unlikely), then the witness should have to point to a business record, already admitted into evidence, establishing the letter was sent.   Otherwise, any testimony the letter was sent is inadmissible hearsay.

I realize this isn’t the most sexy or exciting topic.  Let’s be honest.  It’s boring, legal jargon.  But these are the types of arguments that need to be made at foreclosure trials.  Trust me – if we prevail on these arguments, and your foreclosure case is dismissed, they won’t appear quite so boring any more.

Mark Stopa

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Foreclosure-World, Where Bankrupt Creditors Don’t Exist

There are many aspects of foreclosure-world that are drastically different than other areas of law … things a lawyer would never see in any other practice area.  Rocket dockets.  Senior judges.  Two-minute trials.  But one aspect of foreclosures that nobody ever talks about is how the concept of a bankrupt creditor just doesn’t exist in foreclosure-world.

No, I’m not talking about bankrupt debtors.  We all know many homeowners facing foreclosure utilize Chapter 7 or Chapter 13 bankruptcy to get rid of debt and give themselves a fresh start.  I’m talking about bankrupt banks.

Yes, I know.  Many banks have gone bankrupt in recent years.  In fact, I’d say at least 90% of the lenders who issued the loans on the cases I defend no longer exist, so I’m quite familiar with the concept of banks going bankrupt.

What makes foreclosures so different than any other area of law, though, is that when a bank goes bankrupt, there’s seemingly always another bank which steps into the picture to claim ownership of that mortgage.

Do you think this concept exists in any other area of law?  Pfft.  No way.

Think about it.  Suppose you hire a roofer to put a new roof on your home, the roofer finishes the job, you don’t finish paying the bill, and the roofer goes out of business.  Do you think there’s another company who will chase you down for payment in the place of the first roofer?  Heck no.  That company is out of business, so you got lucky.  You don’t have to pay the debt.  It might still be owed, but as a practical matter, nobody is ever going to pursue payment.

This dynamic exists virtually any time you sign a contract with a company for any type of service and the company goes bankrupt and/or out of business.  You got lucky, and you don’t have to fulfill your contractual obligations.  Well, technically, I suppose you do, but nobody is ever going to call you out if you don’t.  The obligations are just … POOF.  Gone.  In the wind.

I see this dynamic all the time in normal lawsuits.  In recent months, for example, I’ve had clients go out of business.  No, not foreclosure clients; I’m talking in normal litigation cases.  These clients were owed money from various third parties and insurance companies, but they went out of business.  Do you think anyone is going to pursue payment from those insurance companies or third parties?  Heck no.  That’s the reality of the law … the reality except in foreclosure-world.

In the land of foreclosures, banks go bankrupt all the time.  We’ve all seen it.  Yet there always seems to be another, active bank claiming ownership of the bankrupt bank’s mortgages.  There’s seemingly never a time when some bank isn’t willing to say “yeah, that original lender might not exist any more, but we own that mortgage now.”

Some may argue it’s wrong to complain about this.  “You borrowed the money, you shouldn’t complain that you have to pay it back.”  I think that explanation is just wrong.  Sometimes, there absolutely should be a free house because the mortgage company went out of business.  It happens in other areas of law, why not foreclosures?



Mark Stopa

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Just Another Paragraph 22 Case … Or Is It?

Florida’s Fourth District Court of Appeal issued this written opinion today reversing a Final Judgment of Foreclosure.  This decision is yet another case which makes it clear that foreclosure plaintiffs must comply with the “notice and cure” provisions in paragraph 22 of most mortgages before accelerating the balance due and before filing suit.

That’s old news for those in the industry.  The fight is now beyond that stage for many of us, who are regularly arguing whether a paragraph 22 letter, even if sent, satisfies the requirements of paragraph 22.  Plaintiffs like to argue that “substantial compliance” is all that is necessary, while defendants argue the standard is higher.

What I find interesting about this opinion is that it’s yet another case where a Florida appellate court had the chance to explain that a foreclosure plaintiff need only “substantially comply” with the paragraph 22 obligations yet declined to do so.  Likewise, this is another case where a Florida appellate court could have ruled that prejudice was a factor in the analysis, i.e. that the homeowner could only complain about the paragraph 22 letter if he/she had the ability to cure the default, yet did not adopt that analysis.

Here’s a cut and paste of the language I find interesting:

The letter attached to the Complaint was a notice that acceleration had already occurred and was dated only six days prior to the filing of the Complaint. It did not advise of the default, provide an opportunity to cure, or provide thirty days in which to do so. The letter attached to the Complaint did not satisfy section 22’s requirements.

The Fourth District could have said the letter did not “substantially comply.”  Nope.  Instead, it said the letter “did not satisfy section 22′s requirements.”  Big difference.  After all, satisfying Paragraph 22 and “substantially complying” aren’t the same thing, and when the appellate courts keep using terms like “satisfy,” that sure sounds like the defendants are correct in their analysis of this issue.

Mark Stopa

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