How to Defeat Claims of "Business Record Exception" to the Hearsay Rule.

Disclaimer: This article is for educational purposes only and does not constitute legal advice. Always consult with a licensed attorney regarding your specific case.

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The Role of Business Records in Foreclosure Cases

Any experienced foreclosure defense litigator will tell you: nearly every foreclosure case today relies on business records as the primary evidence that a loan account exists and that it has gone into default.

But what exactly is a business record? At its core, it must be a record of actual business undertaken by the company introducing the record. If a servicer introduces a “payment history,” they are asserting that their company received and recorded those payments. If they never received payments, then the “payment history” is not a business record at all—it is hearsay based on data provided by someone else.

That distinction is critical. If the servicer didn’t create the records in the ordinary course of business, then the document is inadmissible as evidence.

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Why the Hearsay Rule Matters

The hearsay rule exists to prevent lying in court. It prohibits the admission of out-of-court statements offered to prove the truth of the matter asserted, unless an exception applies.

The business records exception is one of those exceptions. It was created to allow reliable records—kept in the ordinary course of business and free from bias—to be admitted without requiring every person involved to testify.

But this shortcut only works when:

1. The organization actually created the records in the ordinary course of business, and

2. The organization has no stake in the outcome of the litigation.

In foreclosure, both conditions often fail. The named “servicer” frequently performs none of the actual servicing functions. Instead, third-party financial technology companies like Black Knight or CoreLogic control the records. Worse, many servicers are tied to investment banks with a direct financial interest in the foreclosure outcome.

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Why This Violates Due Process

If courts shift the burden to homeowners to prove that the servicer had no stake in the outcome—without requiring the foreclosure mill to first make a credible allegation—the rules of due process are violated. Homeowners should not have to disprove a claim that was never properly asserted.

Once credibility is in issue, homeowners are entitled to discovery to corroborate (or disprove) the servicer’s claims. This makes foreclosure mills deeply uncomfortable, because such discovery often reveals the servicer is nothing more than a front.

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The Litigation Strategy

How NOT to Challenge Business Records:

• Don’t make contrary allegations. A bare denial won’t overcome the presumption of validity.

• Don’t attack too early. Wait until the servicer fails or refuses to provide corroboration.

How TO Challenge Business Records:

1. Demand corroboration. Ask whether the records were created in the ordinary course of business with both the homeowner and creditors. Request supporting documents.

2. File motions to compel. If they refuse, seek a court order requiring production.

3. Push for sanctions. If noncompliance continues, ask for evidentiary sanctions or a negative inference—that the absence of evidence proves the absence of the obligation.

4. Highlight incompleteness. Many “payment histories” omit disbursements to creditors or proof that the loan was ever booked as an asset. Without those, the record is incomplete and unreliable.

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Why This Works

Foreclosure mills count on judges presuming that documents are valid based on facial appearance. But when servicers refuse to produce corroborating evidence, the absence of evidence becomes evidence of absence.

Without admissible business records, the foreclosure mill has no case. And without proof of ownership of the loan as an asset, there can be no creditor—and therefore, no enforceable default.

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⚖️ Bottom line: Challenging business records properly doesn’t just poke holes in the foreclosure mill’s case—it can completely collapse it.

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Posted in foreclosure defenses, Foreclosure Questions |