New Jersey court rules permit the inclusion of interest on the principal outstanding on a loan secured by a mortgage up to the date of a sheriff’s sale in mortgage foreclosure. Under the applicable rule, the mortgage foreclosure judgment will include interest at the contract rate under the note or other instrument governing the terms for repayment of the secured debt. After the date of judgment, the interest rate is determined under the provisions of Rule 4:42-11, and based on a “legal rate” established annually by a division in the New Jersey Department of Treasury. The just announced legal rate for calendar 2013 is 0% – yes, that is zero. The legal rate is equal to the average rate of return to the nearest whole or half percent earned on cash accounts of the State for the period ending June 30. For all judgments above $15,000, the rate of interest accrual after the date of judgment is 2% over the legal rate. For the smaller judgments it will be zero.
In a down real estate market such as is present in most of New Jersey, this post judgment rate of interest rarely matters. If the property worth less than the secured debt, the proceeds of the sheriff’s sale will not likely result in a full recovery. If the foreclosed lien is less than the value of the property and there is bidding in excess of the amount of the judgment plus post judgment interest, the excess proceeds of sale will be deposited with the court, and the foreclosing creditor can apply for recovery of additional interest under the contract rate before the funds are distributed to junior lien holders or the owner.