Lender Loses – The Problem Of Introducing Business Records (And The 90-Day Notice)

What is this all about?  It certainly sounds like boring legal minutia, and such an assessment might just be right.  But, it is exceptionally meaningful to any foreclosing party, particularly upon home loans and especially regarding proof that the mandated 90-day notice has been sent.  (We proceed upon the assumption that even if our alerts had not regularly addressed the 90-day notice issue, lenders, servicers and their counsel will be well aware of it.)

Although we have made the point before, with some regularity, the problem with proving that the 90-day notice has been sent is more pervasive than it has ever been.  Recent months have presented literally scores of cases where borrowers challenged foreclosures asserting that the 90-day notice was not received.  Failing in the ability to prove that the notice was sent, foreclosing lenders have lost most of the reported cases.

This suggests that the (painful) clarity offered by the new case addressed here is in order [Bank of New York Mellon v. Weber, 169 A.D.3d 981, 94 N.Y.S.3d 582 (2d Dept. 2019)].  A foreclosing party will have some papers/records to demonstrate that the 90-day notice was mailed (certainly it will need to have that).  However, these papers are hearsay, and therefore not admissible in court unless they come under the business records exception to the hearsay rule.

As the court observed in the case under consideration, in order to lay a proper foundation for the admission of evidence under the business records exception to hearsay, the proponent must establish that the record was:  made in the regular course of any business and that it was the regular course of such business to make it, at the time of the act transaction occurrence or event or within a reasonable time thereafter.[1]

To meet the requirement, and upon its motion for summary judgment, the foreclosing plaintiff offered an affidavit of a second assistant vice president of its loan servicer wherein that person attested that she had “personal knowledge of the facts of the matter”, the source of which was her “review of the books and records of the servicing agent of the plaintiff and her own knowledge of the account records regarding this defendant”. She further attested that “the servicing records showed, among other things, that a 90-day notice was sent to the borrower by registered or certified and first class mail”.

Given this, the court observed that the servicing agent did not attest to personal knowledge of the servicing agent’s record keeping business practices and procedures and failed to attest that the records were made in the regular course of the servicing agent’s business and that it was the regular course of the servicing agent’s business to make them at the time of the act, transaction, or event within a reasonable time thereafter.

Accordingly, the servicing agent failed to lay a proper foundation for admission of records and so her assertions based on those records were inadmissible.   Because those assertions were inadmissible, the 90-day notice could not be proven and summary judgment was denied.

While this was not necessarily fatal to the case – the foreclosing plaintiff will need to either proceed to trial on this issue or if another motion for summary judgment can be made (which may be doubtful), to take that path.  Given how time consuming and expensive that could be, the foreclosing plaintiff might even elect to discontinue the action, start it all over again and do it right on the subject of the 90-day notice.

But the lesson of all of this should be apparent.  Proving the 90-day notice is a serious matter and lenders too often are unable to succeed in that proof.  Applicable law, and methodology, should be examined with some care to avoid continued repetition of the dismaying dilemma.

[1] The courts cited as authority for this the following: (CPLR 4518(a); Viviane Etienne Med. Care, P.C. v. Country-Wide Ins. Co., 25 N.Y.3d 498, 508, 14 N.Y.S.3d 283, 35 N.E.3d 451; People v. Kennedy, 68 N.Y.2d 569, 579-580, 510 N.Y.S.2d 853, 503 N.E.2d 501; Matter of Leon RR, 48 N.Y.2d 117, 122, 421 N.Y.S.2d 863, 397 N.E.2d 374; People v. Cordova, 127 A.D.3d 1227, 1228, 9 N.Y.S.3d 90.

Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2019), is a partner with Berkman, Henoch, Peterson, Peddy & Fenchel, P.C. in Garden City, New York. He is also a member of the USFN, The American College of Real Estate Lawyers, The American College of Mortgage Attorneys, an adviser to the New York Times on foreclosure issues and writes a regular servicing column for the New York Law Journal. He is AV rated by Martindale-Hubbell, his biography appears in Who’s Who In American Law and he has been for years listed in Best Lawyers In America and New York Super Lawyers.