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Bayview Loan Servicing, LLC v. Robinson

A-3486-07T3 (N.J. Super. App. Div. 2009) (Unpublished)

AGREEMENTS; LOANS; INTEREST — Absent proof to the contrary, a default interest rate is not to be held as per se unreasonable because, among other things, an interest rate that might have been reasonable at one point, could become unreasonable at another time.

A bank instituted foreclosure against a property owner. The action was settled after the property owner found a buyer. The parties verbally agreed that the foreclosure action would be held in abeyance if the property owner sold the property by a certain date. If the property was not sold by that date, the owner was not to contest the foreclosure. When the property owner received the payoff statement from the bank, it believed the statement violated the oral settlement agreement because it contained fees and other charges that the property owner claimed were not part of the agreement. The bank opposed the property owner’s motion to set aside the foreclosure. It claimed that all of the charges were liquidated damages under the original note and were thus enforceable charges.

The Chancery Court ruled that the bank was entitled to proceed with the foreclosure and to recover default interest. It also held that the interest rates and late charges were reasonable. The Court found that the amount of interest due was to be calculated at the rate set forth in the note. On the other hand, the Court concluded that a claimed lockout fee was unreasonable and was not enforceable as liquidated damages. The bank then accepted the amount paid by the property owner as full satisfaction of the loan. The bank discharged the mortgage and marked the note paid in full. Both parties appealed.

The Appellate Division held that the bank’s appeal was moot because it already accepted payment in full satisfaction of the loan without seeking to have the lockout fee placed in escrow pending appeal. The Court held that the lockout fee, reformation of the payoff statement, and fixing the date through which interest could be charged were not issues of “substantial importance” that would warrant the Court to exercise its discretion and address them on appeal. The Court also dismissed the appeal of the property owner, rejecting the property owner’s contention that the “settlement agreement” actually said that he was not in default. It did so because the agreement was not in writing and the property owner did not submit a certification in support of his motion to reform the payoff statement and did not testify at the hearing before the lower court. The Court also held that the default interest rate was not per se unreasonable, noting that the property owner had presented no proof to the contrary to the lower court. It stated that, while it was aware that the interest rate was high, as the lower court observed, rates of interest change over time and what may be reasonable at one point in time may not be reasonable at another time.

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