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source=https://www.law.com/dailybusinessreview/almID/1202755595786/home-foreclosure-fails-on-ocwen-servicing-records/?back=law)

By Samantha Joseph | April 22, 2016

Home Foreclosure Fails on Ocwen ServicingRecords

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Miami- Bruce Jacobs, with Jacobs Keeley, PLLC (J. Albert Diaz)

Defense lawyer Bruce Jacobs argued that beyond matching columns and fields and

using a checklist to ensure receipt of key documents, the servicer failed to verify

details in the files.

Miami-Dade Circuit Judge Beatrice Butchko rejected Ocwen Financial Corp.’s banking

records and excluded its testimony after finding the loan servicer failed to verify its

predecessor’s records in a foreclosure case.

Butchko granted an involuntary dismissal in HSBC Bank USA’s suit against Miami

homeowner Joseph Buset, whose loan was initially serviced by Litton Loan Servicing

LP, which Ocwen acquired in 2011.

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The case hinged on whether the judge would accept testimony about the servicing

document transfer, which Ocwen calls its boarding process, or disregard the

financial documents as insufficient to meet the criteria for business records exempt

from the hearsay rule.

“This boarding process is a legal fiction, and it means something different to every

entity,” Butchko ruled from the bench during a March 17 hearing.

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Ocwen purchased Litton in a $264 million cash deal with Goldman Sachs Group Inc.

that gave it servicing rights to Buset’s debt.

Butchko had to decide how to treat loan documents that became part of Ocwen’s

business records but remained subject to hearsay objections unless the company

could show it independently verified the data after transferring the loans. She

considered evidence on Ocwen’s boarding process — the procedure by which

financial services companies transfer account data from one lenders’ management

system to another after trading loan portfolios.

Witnesses for lenders in foreclosure cases must show they did independent fact-

checking to qualify their files as business records and not hearsay. To achieve this,

HSBC called four-year Ocwen employee Sherry Keeley to testify about the servicer’s

business loan boarding practices and procedures.

Keeley testified Ocwen matches dozens of points as part of a data mapping process

to ensure accuracy.

“Our starting point is identical to their ending point in regards to whether it’s

payments or taxes, insurance, any financial information, late charges, fees,” she said.

“Their ending figures are identical to our beginning.”

But Buset’s attorney, Miami foreclosure defense lawyer Bruce Jacobs, seized on a

$1,900 discrepancy in two versions of the default letter, to argue that beyond

matching columns and fields and using a checklist to ensure receipt of key

documents, the servicer failed to verify details in the files.

“I have done this investigation for a long time,” he said, noting, “The appellate courts

are going under this presumption that there is some type of meaningful auditing and

verification.” But Jacobs maintained, “You just heard it from a lawyer who knows how

to properly phrase the questions that she’s basically testifying to all — all of

this is still hearsay.”

Butchko was left weighing how to treat Ocwen’s post-acquisition files.

“This is a little different in that Litton was acquired by Ocwen, and so there isn’t a

Litton employee that can come here and testify other than the ones they have

working there because it’s all one company now,” she said. “Let’s say that Ocwen was

the only servicer ever. They would come in here, and they wouldn’t have to testify

that their documents were checked for accuracy because it’s presumed that a

business would keep accurate records, right?”

Jacobs conceded the point.

“Now that these companies are one and Ocwen has to continue to function with the

prior servicer documents and they are one company, why should I require more

from them?” the judge asked.

Jacobs argued the bank witness failed to overcome the hearsay objection. But lender

attorney Sarah Stemer of Brock & Scott in Fort Lauderdale argued the bank

presented a qualified witness with first-hand knowledge of the boarding process to

testify about its verification procedures.

“They have the full payment history,” Stemer argued. “It’s not like they are just

scanning it in and calling it a day.”

But Butchko disagreed.

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“No, but that is what she said,” the judge responded. “That they are scanning it in

and calling it a day.”

The judge excluded the prior servicer’s records.

“Honestly, what I’ve heard here today is not what I imagined the boarding process

is,” Butchko said. “Basically, adjusting the names of the categories of the documents

so taxes and insurance from one agency become escrow funds in another. So that’s

not checking for accuracy. That’s making sure that the columns match. There’s no

mathematical calculation to make sure that the math is right unless there’s a

contest.”

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