The District Court of Appeal of Florida, Fifth District, recently held that the trial court erred in ruling that a mortgagee failed to comply with the pre-foreclosure notice requirements of the mortgage, as the mortgagee’s default notice substantially complied with the mortgage and did not prejudice the borrower.

The Court also held that testimony by the current loan servicer’s employee with regard to a prior loan servicer’s business records established sufficient foundation for the prior servicer’s records to be admitted into evidence as business records under Florida law.

A copy of the opinion is available at:  Link to Opinion.

In July 2006, the borrower executed a promissory note and accompanying mortgage for $187,000.  She defaulted on the mortgage beginning in August 2009.  In May 2010, the mortgagee filed a complaint to foreclose, and the case proceeded to a non-jury trial in September 2014.

At trial, an employee of the loan servicer testified for the mortgagee regarding various records it obtained from the prior loan servicer, including a foreclosure referral document and loan payment history.  Despite the employee’s testimony, the trial court sustained the borrower’s objections, finding that the employee failed to establish a proper foundation for the records’ admissibility under the business records exception to the hearsay rule.  See § 90.803(6), Fla. Stat.  The trial court explained that the business records exception “was based upon a party’s own records, not someone else’s records.”

Although the trial court excluded these records, it admitted a notice of default and intent to accelerate sent by the prior servicer in November 2009. The default letter provided, in relevant part:

You may, if required by law or your loan documents, have the right to cure the default after the acceleration of the mortgage payments and prior to the foreclosure sale of your property if all amounts past due are paid within the time permitted by law. However, BAC Home Loans Servicing, LP and the Noteholder shall be entitled to collect all fees and costs incurred by BAC Home Loans Servicing, LP and the Noteholder in pursuing any of their remedies, including but not limited to reasonable attorney’s fees, to full extent permitted by law. Further, you may have the right to bring a court action to assert the non-existence of a default or any other defense you may have to acceleration and foreclosure.

After the mortgagee rested its case, the borrower moved for an involuntary dismissal, arguing the default letter failed to comply with paragraph 22 of the mortgage.

As you may recall, Paragraph 22 of the Fannie Mae/Freddie Mac Uniform Security Instrument provides, in pertinent part, that the default letter shall specify:

(a) the default, (b) the action required to cure the default, (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured, and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Security Instrument, foreclosure by judicial proceeding and sale of the Property. The notice shall further inform Borrower of the right to reinstate after acceleration and the right to assert in the foreclosure proceeding the non-existence of a default or any other defense of Borrower to acceleration and foreclosure.

The borrower argued that, because the default letter stated the borrower would have to file an action to stop foreclosure, rather than raising any defenses in the mortgagee’s foreclosure case, it supposedly did not properly inform the borrower of her rights with respect to foreclosure. The trial court agreed and granted the borrower’s request for involuntary dismissal.

The Fifth District reversed on appeal.  The Appellate Court ruled that the prior servicer’s default letter substantially complied with paragraph 22 of the mortgage and caused no prejudice to the borrower.

Additionally, the Fifth District agreed with the mortgagee that the trial court erred by excluding various records obtained from the prior servicer.

In a prior ruling, the Appellate Court held that a current servicer can establish a proper foundation for admission of a prior servicer’s records “so long as all the requirements of the business records exception are satisfied, the witness can testify that the successor business relies upon those records, and the circumstances indicate the records are trustworthy.” Berdecia, 169 So. 3d at 216 (citing Le v. U.S. Bank, 165 So. 3d 776 (Fla. 5th DCA 2015); Calloway, 157 So. 3d at 1074)).  Following this prior ruling, the Fifth District here held that the trial court abused its discretion by excluding business records obtained from the prior servicer.

Thus, the Fifth District reversed the trial court’s entry of involuntary dismissal and remanded for a new trial.