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Eichler v. Camilo

A-3207-98T5 (N.J. Super. App. Div. 2000) (Unpublished)

MORTGAGES; SHERIFF; COMMISSIONS—A mortgage workout agreement requiring fixed monthly payments constitutes a consensual modification to a mortgage note even if the fixed payments have the implicit effect of converting a fixed rate interest loan to a variable rate loan.

In the context of a mortgage foreclosure, a mortgagor contended that the lower court miscalculated the remaining monies owed on the mortgage. At issue was the meaning of a mortgage modification made at an earlier time when the mortgagor was in default. In particular, the parties agreed, at that time, that the mortgagor would pay “$5,000 per month starting March 10, 1995 to be paid on account of principal in addition to $21,663 per month interest” (emphasis in the original). The mortgagor contended that because it was making monthly payments on account of principal and was thereby reducing the balance due, the constant monthly interest payment amounted to more than the original agreed-upon 10 percent on the unpaid balance, thereby converting the fixed-rate interest component of the loan to a variable interest rate. The Court agreed with the mortgagor that the interest rate increased each month as the additional $5,000 payments were made, but the Court disagreed with the conclusion that the mortgagor reached. According to the Court, the question was not whether the interest rate was converted to a variable rate, but whether the mortgagor, for good consideration, had agreed to this modification. In that regard, the Appellate Division agreed with the lower court that the agreement coupled with the mortgagor’s compliance for several years without objection, constituted a consensual modification supported by the mortgagee’s forbearance from their legal recourse of the mortgagor’s earlier default. In essence, the modification agreement meant that the interest rate would, in fact, increase as the principal balance of the loan decreased.


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