While news reports state that the number of foreclosures is falling in 2014, many courts are still dealing with the mortgage crisis that rocked this nation six years ago.  Many sources have told about some of the unprofessional practices of mortgage servicers and owners in the wake of the mortgage crisis when these companies foreclosed on or tried to foreclose on hundreds of thousands of borrowers.  Some of these practices have included such actions as robo-signing or the forging of loan documents.  The reason for those unlawful practices are made clear in recent opinion from the Florida First District Court of Appeal.  Hunter v. Aurora Loan Services, NO. 1D12-6071 (Fla. 1st DCA filed April 25, 2014). Continue to visit our blog for the most recent information about Real Estate law. Please contact us at (855) 977-1212 if you would like to speak with an Experienced Real Estate Lawyer about your legal issue.

In 2007, Lehman Brothers allegedly purchased from MortgageIT a mortgage and promissory note made to Lewis B. Hunter, Jr. On April 3, 2007, Aurora Loan Services, which is a subsidiary of Lehman Brothers and handles their loan services, initiated a foreclosure lawsuit against Mr. Hunter.  Florida is a judicial foreclosure state, which means that a mortgage holder must file a lawsuit in order to foreclose on a borrower who has defaulted on his/her loan.  The major issue in the case was proving that Aurora Loan Services had the right to foreclose because it owned and held the mortgage and the promissory note from MortgageIT.  

At trial, evidence demonstrated that MortgageIT was the original owner of the loan and assigned it to Aurora.  Yet the only document that demonstrated that MortgageIT assigned the mortgage and the note to Aurora or its parent company is a “Corporate Assignment of Mortgage”, executed on June 11, 2007 (two months after Aurora filed for foreclosure) and recorded on January 8, 2008.  A person does not have the right to file for foreclosure unless they own the mortgage and the note.  To demonstrate that they had the right to file for foreclosure on April 3, 2007, Aurora produced two computer-generated documents: an “Account Balance Report”, which stated that Aurora paid in full on 12/20/2006 and a “consolidated notes log”, which indicated that the mortgage and note were sent to Aurora on April 18, 2007.  These documents are hearsay evidence, but Aurora asserted that they were admissible under a hearsay exception for Business Records.  The trial court accepted these documents and what they purported to state.  The trial court found for Aurora and granted them the foreclosure.  Mr. Hunter appealed to Florida’s First District Court of Appeal.

The First District looked at the documents that Aurora produced to prove that they had the right to file for foreclosure to see if they did in fact meet the Business Records exception.  The Business Records exception to the hearsay rule states that a document that is hearsay can be admitted as long as it was made at the time of the event, is normally created in the course of typical business activity and that it is the practice of that business to keep the record.  Furthermore, the document must be made by or with information from a person with knowledge of the event.  In this case, Roger Martin, an employee of Rushmore Loan Management Service and previous employee of Lehman Brothers from 2004-2007, testified as to the authenticity of Aurora’s documents.  Mr. Martin testified that the documents that Aurora produced are those normally kept by mortgage servicers, but he did not have personal knowledge of the information in the documents.  Furthermore, Mr. Martin could not demonstrate that these documents were produced by MortgageIT.  The First District Court of Appeal held that Mr. Martin’s testimony was not sufficient to allow the hearsay records to be admitted into evidence because his testimony could not establish that the documents were produced by MortgageIT or that he had personal knowledge of the documents.  Since the “Account Balance Report” and the “consolidated log notes” were the only documents that showed that Aurora had the right to foreclose, the First District reversed the trial court decision and overturned the foreclosure.

The First District’s decision in this case is one of many cases in the advent of the mortgage crisis in 2008 that shows that mortgage holders are engaged in irregularities.  Therefore, if you are facing foreclosure, make sure that the entity trying to foreclose on you actually owns the mortgage and note. Continue to visit our blog for the most recent information about Real Estate law.  Please contact us at (855) 977-1212 if you would like to speak with an Experienced Real Estate Lawyer about your legal issue.