Recently, several Florida circuit courts have addressed the onboarding procedures of mortgage loan servicers[i]. Courts are more closely scrutinizing a servicer’s boarding procedures to determine whether documentary evidence created by a prior servicer, but proffered into evidence at trial by a subsequent servicer, will be deemed admissible. Generally, if a document is not created by a party to a lawsuit, the party cannot introduce it into evidence to support their case. [ii] This is known as the “hearsay[iii] rule,” an exclusionary rule of evidence.

There are several exceptions to the hearsay rule, one of which is known as “the business records exception”[iv].  Florida courts apply this exception in the foreclosure context to allow documents created by a prior servicer to be admitted into evidence by a subsequent servicer[v], provided the servicer proffer adequate foundational testimony.

Adequate foundational testimony is the critical point in trying a case which includes prior servicer business records. Typically, this testimony includes a description of how the servicer received the transferred records, where they were stored, how they were audited, and the transition process from staging to production. As a whole, the servicer’s foundational testimony must demonstrate the records were (i) accurate, (ii) reliable and (iii) trustworthy[vi] before they were boarded.

An adequate boarding process which conclusively establishes reliability of prior servicer records is the standard that must be established at trial. Plaintiff witnesses who have training and expertise in the boarding process provide competent testimony to establish the business records exception to the hearsay rule. If adequate testimony is not presented, the court will exclude the prior servicer’s documents, which often includes the loan payment history, loan comments and demand letters.  If business records are excluded, the foreclosure case is subject to dismissal for lack of proof.

Testimony regarding a servicer’s boarding procedures has become a prominent and often disputed aspect of foreclosure trials. Recently, a Florida Court delved even further into the substance and veracity of testimony proffered about the boarding process.  A recent circuit court case out of Miami-Dade County, Green Tree Servicing LLC v. Marin[vii], illustrates this trend and the serious repercussions which can result when the veracity of a witness’s testimony is tested.

In Marin, Defense counsel took the deposition of a servicer employee and questioned the boarding process. The employee offered deposition testimony regarding a training manual he reviewed which included a flow chart documenting the servicer’s boarding procedures. The borrower’s counsel propounded discovery seeking the training manual. Despite a court order to produce the training manual, the servicer refused to do so claiming it was privileged work product. The judge issued a show cause order seeking an explanation from both the servicer and its attorneys as to why they should not be held in indirect criminal contempt for their failure to comply with the court’s order. Shortly after the show cause order was issued, the servicer produced the training manual, but it did not include the referenced flow chart. This continues to be a key issue in the case as the court scheduled a criminal trial for indirect contempt of court against the Plaintiff’s attorneys for February 1, 2018.

The Marin case, and others[viii] like it, bring to light the critical nature of the boarding process, the procedures related to the process, the training and testimony regarding boarding prior records at trial.

Servicers take proactive steps to ensure they have a well-documented, well-understood, well-trained and well-adhered to procedure in place for boarding loans. The onboarding procedure ensures documents received from another servicer are accurate, reliable and trustworthy before they are integrated into the new servicer’s system. A servicer’s witness at a deposition or trial will be intimately familiar with these onboarding procedures, together with  any and all documentation which supports or describes the process to ensure consistent testimony.

[i] Throughout this article, the terms “bank” and “servicer” will be used interchangeably.

[ii] § 90.801, Fla. Stat. (2017).

[iii] Hearsay is defined as “a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted.” § 90.801, Fla. Stat. (2017). Documents are considered “statements” for purposes of this rule.

[iv] The business records exception to the hearsay rule is codified at Fla. R. Evid. 90.803(6).

[v] Bank of N.Y. v. Calloway, 157 So. 3d 1064, 1069 (Fla. 4th DCA 2015).

[vi] Bank of N.Y. v. Calloway, 157 So. 3d 1064 (Fla. 4th DCA 2015).

[vii] Green Tree Servicing LLC v. Marin, Miami-Dade Circuit Court Case No. 2015-CA-020574.

[viii] In another Miami-Dade circuit court foreclosure case, HSBC Bank v. Buset, Case No. 12-38811 CA 01, the judge concluded the bank’s boarding process was nothing more than “a legal fiction.” The court granted the borrower’s motion for involuntary dismissal based, in part, on that finding.