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Olympus Servicing, L.P. v. Carr

A-6111-04T5 (N.J. Super. App. Div. 2006) (Unpublished)

FORECLOSURE; INTEREST—Once a judgment of foreclosure is issued, the interest rate on the amount owed is set at the rate provided by court rules, not at the contract rate even if there is a long delay before foreclosure actually takes place.

A homeowner defaulted on a mortgage loan and a foreclosure complaint was filed. The final judgment of foreclosure included accumulated interest at the contract rate. Over a course of more than eighteen months, the borrower made a number of bankruptcy filings, each time delaying the sheriff’s sale. Finally, the foreclosing lender obtained relief from the automatic stay. In anticipation of the pending sale, the foreclosing lender also filed a motion “to amend the final judgment to include post-judgment interest at the contract rate, rather than at the rate generally allowed by” Court Rules. Its request for interest was denied.

The foreclosing lender appealed, arguing that the lower court abused its discretion by not increasing the post-judgment interest rate to the contract rate and leaving it at the rate set forth in R. 4:42-11(a). Further, it argued that it was “unfair to deprive a mortgagee of the contract rate of interest where a mortgage debtor delays execution on the real estate by filing repeated bankruptcies.” Its grievance was that “delay favors both the defaulting mortgagor and any junior mortgagee, whose loan will continue to earn contract-rate interest during the pendency of the foreclosure proceedings.” The foreclosing lender also asked the Appellate Division to “adopt a blanket rule that in mortgage foreclosure cases, post-judgment interest should always be assessed at the contract rate.”

“It is well-established that in mortgage foreclosure cases, interest is calculated at the contract rate until the date of final judgment. ... Thereafter, interest is calculated in accordance with Rule 4:42-11(a), which provides that judgment shall bear interest at the rate specified in the Rule, ‘[e]xcept as otherwise ordered by the court or provided by law.’” To deviate from the rate specified in the Rule, a court must find “particular equitable reasons for doing so.” The Court also rejected the foreclosing lender’s application for an amended judgment based on monies advanced for taxes and insurance because the lender’s certification came from its attorneys instead of from its own employees. According to the Court, such information should have come from “the mortgagee’s employees having personal knowledge of that information.” This also included a rejection of the information concerning what the lender paid in connection with the bankruptcy proceeding.

As to the request to “formulate a new rule of law concerning post-judgment interest in mortgage foreclosure cases, the Court said, ‘no.’” It found that the lower court proceedings “were entirely one-sided in that [the borrower] did not appear.” It also pointed to what it called “the well-established principle that new rules of law should be formulated by the Supreme Court rather than by an intermediate appellate court.” Further, it deemed it to be “injudicious to decide such an important issue in a case in which no one represents the debtors’ point of view.” Lastly, it felt that “[e]ven if it were appropriate to create a new rule concerning post-judgment interest on mortgage debts, such a dramatic shift in the law would best be addressed by Court Rule, a procedure in which all of the stakeholders can participate rather than in a litigation in which only one side has appeared.”

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