Should the Borrower be obligated to pay the Bank an Excessive Amount of money for Interest where the Bank delayed the commencement of the foreclosure action and/or has been lax in its prosecution of the foreclosure action?

We have often encountered cases where the Plaintiff fails to commence a foreclosure action until years after the date of the alleged default by the Borrower in failing to make the payments due under the Note and Mortgage. In other cases, the Bank commences the foreclosure action, but fails to aggressively prosecute thew action. Some foreclosure actions linger for countless years. When the Bank finally requests a Judgment of Foreclosure & Sale from the Court, which enables it to conduct a foreclosure sale, the Bank claims that it is entitled to hundreds of thousands of dollars in interest on the unpaid principal balance of the loan. If there is a substantial period of time that has passed from the default date and the date of the request for the judgment the amount sought for interest could equal the amount of the unpaid balance.

The Law Office of Ronald D. Weiss, PC has successfully argued that the Court should exercise its discretion and reduce the amount of interest awarded to the Bank in these circumstances.

CPLR § 5001 provides that “in an action of an equitable nature, interest and the rate and date from which it shall be computed shall be in the court’s discretion.”

It is well settled law in the State of New York that “a foreclosure action is equitable in nature and triggers the equitable powers of the court.” See US Bank, NA v. Williams, 995 NYS2d 172 (2 nd Dept. 2014). “Once equity is invoked, the court’s power is as broad as equity and justice requires.” Id.

The recovery of interest is within the Court’s discretion and “the exercise of that discretion will be governed by the particular facts in each case, including any wrongful conduct by either party.” See Dayan v. York,51 AD3d 964, 859 NYS2d 673 (2 nd Dept. 2008).

Notably, in US Bank v. Peralta, 191 AD3d 924, 142 NYS3d 568 (2 nd Dept. 2021)), the Court reduced the interest awarded to the plaintiff lender based upon the plaintiff lender’s inordinate delay in prosecuting the action.

In US Bank v. Peralta, supra, The Appellate Division held that:

“we agree with Peralta that the Supreme Court improvidently exercised its discretion in denying that branch of her cross motion which was to reduce the accrued interest due to the plaintiff’s delay in the action. A foreclosure action is equitable in nature (see Notey v. Darien Constr. Corp., 41 N.Y.2d 1055, 396 N.Y.S.2d 169, 364 N.E.2d 833). As relevant here, CPLR 5001(a) provides that “in an action of an quitable nature, interest and the rate and date from which it shall be computed shall be in the court’s discretion.” The exercise of the court’s discretion in determining the appropriate interest is governed by the articular facts in each case (see Greenpoint Mtge. Corp. v. Lamberti, 155 A.D.3d 1004, 1005–1006, 66 N.Y.S.3d 2; Dayan v. York, 51 A.D.3d 964, 965, 859 N.Y.S.2d 673). Here, in view of the lengthy, unexplained delays by the plaintiff in prosecuting this action, the plaintiff should recover no interest for the approximately 64–month period from May 2008, when this action was commenced, until October 3, 2013, when the plaintiff moved to vacate the prior order of reference and for a new order of reference. In addition, the plaintiff should recover no interest for the approximately 19–month period from October 23, 2015, when the bankruptcy stay was lifted until May 8, 2017, when the plaintiff moved for leave to file a late notice of sale and for an extension of time to sell the premises (see Greenpoint Mtge. Corp. v. Lamberti, 155 A.D.3d at 1005–1006, 66 N.Y.S.3d 32; US Bank N.A. v. Williams, 121 A.D.3d 1098, 1102–1103, 995 N.Y.S.2d 172; Dayan v. York, 51 A.D.3d at 965–966, 859 N.Y.S.2d 673; Danielowich v. PBL Dev., 292 A.D.2d 414, 415, 739 N.Y.S.2d 408; Dollar Fed. Sav. & Loan Assn. v. Herbert Kallen, Inc., 91 A.D.2d 601, 602, 456 N.Y.S.2d 430).”

Similarly, in Greenpoint Mortgage Corp. v. Lamberti, 155 AD3d 1004, 66 NYS3d 32 (2^nd Dept 2017), the Appellate Court held that:

“Here, in view of the lengthy delay by PE-NC’s predecessors in interest in prosecuting this action, PE-NC should recover no interest for the roughly three-year period of time from when the action was commenced in 2005 to when the defendant filed a request for judicial intervention in 2008. While PE-NC did not cause this delay, it should not benefit financially, in the form of accrued interest, from this delay caused by its predecessors in interest. Furthermore, PE-NC should not recover interest on the counsel fees awarded to it. Paragraphs 7 and 21 of the mortgage are inconsistent regarding whether interest could be recovered on counsel fees. Since “ambiguities in a contractual instrument will be resolved contra proferentem, against the party who prepared or presented it” (151 W. Assoc. v Printsiples Fabric Corp., 61 NY2d 732, 734 [1984]), this ambiguity must be resolved against PE-NC, whose predecessors in interest presented the mortgage. Moreover, interest awarded under paragraph 7 of the mortgage, on money advanced to protect the lender’s rights in the property, should not have been awarded at the rate of 17%, but at the “Note rate,” which, in this case, was 7.25%.”

Where a lender engaged in wrongful conduct, the Second Department has consistently ruled that the Court has the power to cancel and/or reduce interest and penalties that accrued on a loan. See US Bank, NA v. Smith, 123 AD3d 914, 999 NYS2d 468 (2^nd Dept. 2014) (holding that it was a proper exercise of the lower’s court discretion to bar interest where lender failed to negotiate in good faith); Deutsche Bank Trust Co. v. Slalhakis, 90 AD3d 983, 935 NYS2d 651 (2^nd Dept. 2011.

The impact on the Borrower of an award to the Plaintiff of an exorbitant and excessive amount of interest is drastic because it robs the home of all equity. The Borrower cannot afford a loan medication and cannot sell the home for a profit and is often forced to simply let the Bank sell the home. If the Court reduces the amount owed to the Bank, The Borrower has options.