This is a spin on my 09/10/13 post discussing how to prove a default. Many mortgage loans, both residential and commercial, are “serviced” by companies separate and distinct from the lender itself. In a nutshell, servicers are the liaison between the lender and the borrower (my definition). Servicers are therefore agents of the lenders. Whether and to what extent employees of servicers can testify at a trial on behalf of the lender was at issue in Riviera Plaza v. Wells Fargo, 2014 Ind. App. LEXIS 208 (Ind. Ct. App. 2014).
Objection. In Riviera, a case I discussed last week, the defendants in the commercial mortgage foreclosure objected to the testimony of witnesses who serviced the loan on behalf of the plaintiff, Wells Fargo, as well as predecessors in interest to Wells Fargo. All of the witnesses testified about the borrower’s default on the promissory note, including that the borrower failed to make scheduled loan payments during the time each specific witness serviced the loan. The borrower challenged whether the witnesses were competent to testify and specifically claimed that the witnesses lacked the requisite personal knowledge.
Competent. Indiana Rule of Evidence 602 “Lack of Personal Knowledge” provides that a “witness may testify to a matter only if evidence is introduced sufficient to support a finding that the witness has personal knowledge of the matter.” So, a lack of personal knowledge renders the witness incompetent. A determination of competency is a determination of whether, and to what extent, a witness may testify at all. Indiana case law provides that “a witness’ personal knowledge of a situation can be inferred from his or her position or relationship to the facts set forth in his or her testimony or affidavit.” Moreover, Indiana cases hold specifically that personal knowledge can be inferred from a witness’ position as a recovery specialist for a loan servicer. Further, an asset manager “and his possession of files relating to the debt” justifies admission of the testimony concerning a borrower’s default and the amounts owed on the debt.
Admissible. The upshot is that employees of mortgage loan servicers are indeed the proper witnesses to prove a lender’s case to enforce its loan, assuming a proper foundation is laid for that particular witness to testify. The Court expanded on this idea:
Here, each of the challenged witnesses testified that [the borrower] failed to make scheduled loan payments during the time in which each serviced the loan pursuant to their positions in loan recovery for the appropriate loan services. Each of the challenged witnesses further testified to the amount owed and indicated that they had personal knowledge of the loan and serviced the loan in a manner consistent with the policies employed in the loan servicers’ normal courses of business. As such, we conclude that the trial court did not err in determining that each of the challenged witnesses held the requisite personal knowledge to testify about [the borrower’s] default of the loan.
Normally the basis of this kind of testimony will be on the witness’ review and analysis of the records maintained by the servicer. Although the Court in Riviera did not dwell on the records review concept, experience tells me that the review of loan records is the primary way to form a basis for the requisite personal knowledge of servicer witnesses. Riviera supports this proposition.