Eastern Savings Bank, FSB v. McLaughlin United States District Court, Eastern District of New York 13 CV 1108
Federal Magistrate Judge Lois Bloom of the Eastern District of New York has held that New York law permits interest to accrue at the default rate even after the plaintiff is awarded summary judgment in foreclosure as long as the loan documents so provide in clear, unambiguous and unequivocal language.
In this case, heard in federal court on diversity grounds, the plaintiff was awarded summary judgment in foreclosure. The plaintiff sought to recover interest during the period after the award of summary judgment at the loan’s default interest rate of 24%. The defendant-borrower contended that after summary judgment, the statutory rate of 9% applied. The District Court referred the matter to Magistrate Judge Bloom.
Magistrate Judge Bloom ruled that New York Law provides that where there is a “clear, unambiguous, and unequivocal expression to pay an interest rate higher than the statutory rate” until the judgment is paid, interest on an unpaid mortgage accrues at the default rate even when the default interest rate is greater than the statutory interest rate.
The lesson of Eastern Savings Bank, FSB v. McLaughlin is that a mortgagee may contract for default interest rates that are greater than the statutory rate, but must do so in clear, unambiguous, and unequivocal language in order to receive default rate interest post-judgment.