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63 » VISIT US ONLINE @ DSNEWS.COM NATIONAL ADMITTING A PRIOR SERVICER'S RECORDS INTO EVIDENCE UNDER THE "ADOPTIVE BUSINESS RECORDS DOCTRINE." By Graham H. Kidner, General Counsel, Hutchens Law Firm A growing body of case law supports the qualification of a prior servicer's loan records as a business records exception to the hearsay rule, under the "adoptive business records doctrine". Perhaps not surprisingly, given the sheer volume of foreclosure activity and resulting litigation, Florida courts have led the way in allowing a servicer to rely on a prior servicer's records. In WAMCO X XVII, Ltd. V. Integrated Electronic Environments, Inc., the servicer's witness had personal knowledge of how his company kept its records and was personally involved in servicing loans. He was familiar with the computer record keeping system of the prior servicer and the generally accepted policies and procedures of servicing companies. He reviewed the records being transferred and was involved in checking for errors and omissions when the records were transferred. His testimony, relying on information gathered and maintained by the transferor servicer, was found admissible under the business records exception. For more see, Sas v. Federal National Mortgage Association which held that Seterus' records custodian testified that he was familiar with its business practices in making and maintaining business records, Fannie Mae's record-keeping requirements for mortgage loan servicers, and the servicer industry's general practices in making and maintaining business records. He explained that prior servicer, Chase, was bound by the same Fannie Mae requirements in maintaining mortgage loan records and that Seterus thoroughly reviewed Chase's records at the time of transfer and found no discrepancies. See also, Nationstar Mortgage, LLC v. Berdecia, which held that although the witness did not personally participate in the "boarding" process to ensure the accuracy of the records acquired from CitiMortgage when Nationstar took over servicing the subject loan, she demonstrated a sufficient familiarity with the "boarding" process to testify about it. Her testimony not only satisfied the requirements for admitting the mortgage documents under the business records exception to the hearsay rule, her testimony also demonstrated knowledge of the accuracy of the records. However, a poor choice of witness, or a poorly prepared witness can lead to the exclusion of the testimony. For example, Burdenshaw v. Bank of New York Mellon and Hunter v. Aurora Loan Services, LLC. In these two cases the servicer's records custodian failed to testify that the successor servicer of the loan independently verified the accuracy of the payment histories received from the prior servicer or to detail the procedures used for such verification. Indeed, allowing a litigant to introduce records it relies on in its business operations, where those records were created by a third party is not a new phenomenon. Several federal circuit courts have ruled favorably on the subject: U.S. v. Moore held that the head of a bank 's consumer loan department was qualified to introduce a service bureau's computer generated "loan histories" as the bank 's business records where the bank could and did retrieve information from the service bureau. Browner v. Allstate Indemnity Company held that "a record created by a third party and integrated into another entity's records is admissible as the record of the custodian entity, so long as the custodian entity relied upon the accuracy of the record and the other requirements of Rule 803(6) are satisfied." In United States v. Irvin, the court ruled that "if it can be established that a given document was relied on by a business and incorporated into that business's records in the ordinary course, it is irrelevant that the record was generated by a third party so long as Rule 803(6) is otherwise satisfied." And the Supreme Judicial Court of Massachusetts ruled favorably on the subject ten years ago. Given the common practice of banks buying and selling loans, we conclude that it is normal business practice to maintain accurate business records regarding such loans and to provide them to those acq uiring the loan. erefore, the bank need not provide testimony from a witness with personal knowledge regarding the maintenance of the predecessors' business records. e bank 's reliance on this type of record keeping by others renders the records the equivalent of the bank 's own records. To hold otherwise would severely impair the ability of assignees of debt to collect the debt due because the assignee's business records of the debt are necessarily premised on the payment records of its predecessors. Beal Bank, SSB v. Enrich A recent case in North Carolina, while not overtly adopting the adoptive business records doctrine, suggests the appellate courts would be receptive to the concept. In State v. Hamlin, the court ruled as admissible testimony given by, and computer printouts offered into evidence from, a grocery store security chief based on records of the store's gift cards' usage where those records, and the printouts from the computer system, were created and maintained by a third-party vendor to the store. Unfortunately, as with many legal concepts, there is no uniformity across the states. For example, in CACH, LLC v. Askew the court observed: e business records exception to the hearsay rule applies only to documents generated by the business itself.... Where the status of the evidence indicates it was prepared elsewhere and was merely received and held in a file but was not made in the ordinary course of the holder's business it is inadmissible and not within a business record exception to the hearsay rule under §490.680, RSMo 1986. A custodian of records cannot meet the requirements of §490.680 by simply serving as "conduit to the flow of records" and not testifying to the mode of preparation of the records in question. Further, Courts in Kansas and Nebraska have recently refused to follow the adoptive business records doctrine.

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