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Wilmington Trust Company v. IEIEC World Headquarters Corporation

A-7240-96T2 (N.J. Super. App. Div. 1998) (Unpublished)

LOANS—Absent detrimental reliance by a borrower, late notice from a lender regarding an interest rate change does not relieve the borrower of its obligation to pay the (higher) interest rate.

A borrower executed a variable rate note in favor of a loan association. The obligation required monthly payments. Its initial stated interest rate was 6.57%. The note called for periodic changes in the interest rate. The note (and mortgage) were later assigned to the Resolution Trust Company and then to a series of successor lenders. Ten months after the “change date” called for in the note, a letter was sent to the borrower stating that the new interest rate would be 9.25% and that the monthly payments would be changed accordingly. The borrower refused to accept the new rates and continued its payments at the old rate. The lender rejected these payments and brought an action in foreclosure. The borrower counterclaimed for breach of contract. The lower court ruled, and the Appellate Division affirmed, that the 9.25% interest rate was enforceable in accordance with the change notice to the borrower. The Appellate Division also noted that while the failure to give notice was a mistake, the borrower did not rely on it, but rather benefitted from it. To deny the lender the increased rate would result in an unwarranted windfall to the borrower.


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