For Whom the Interest Tolls

By: Jonathan H. Freiberger

A significant part of the amounts due to a lender in a mortgage foreclosure action is interest on the outstanding principal. Sometimes the actions (or inaction) of a lender can result in significant reductions in the amount of interest awarded to it in a foreclosure action.

In prior BLOG articles, we discussed the court’s power to toll the accrual of interest in mortgage foreclosure actions. CPLR 5001(a) provides, in relevant part, 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.” See also U.S. Bank, N.A. v. Peralta, 191 A.D.3d 924, 925-26 (2nd Dept. 2021);.Wells Fargo Bank, N.A. v. Daniel, 231 A.D.3d 899, 901 (2^nd Dept. 2024); M&T Bank v. Givens, 242 A.D.3d 974, 976 (2nd Dept. 2025). In that regard, a “foreclosure action is equitable in nature and triggers the equitable powers of the court.” U.S. Bank Nat. Ass’n v. Williams, 121 A.D.3d 1098, 1101-02 (2nd Dept. 2014) (numerous citations and internal quotation marks omitted); see also Wells Fargo, 231 A.D.3d at 901; M&T Bank, 242 A.D.3d at 796. Once invoked, the Court’s equity powers are “as broad as equity and justice require.” Deutsche Bank National Trust Co. v. Armstrong, 218 A.D.3d 738, 739 (2nd Dept. 2023) (citations and internal quotation marks omitted). The court, in exercising its discretion, “is governed by the particular facts in each case.” U.S. Bank, 191 A.D.3d at 926 (citations omitted).

A court’s authority can be used to toll interest in, inter alia, foreclosure actions, where the lender’s conduct “is deemed wrongful” or where there has been “unexplained delay” in the prosecution of the action. Wells Fargo, 231 A.D.3d at 901 (citations and internal quotation marks omitted); see also Deutsche Bank Trust Company Americas v. Knights, 231 A.D.3d 1016, 1018 (2nd Dept. 2024); Wells Fargo Bank, N.A. v. Doran, 244 A.D.3d 1275 (2nd Dept. 2025). As the Second Department noted, “a plaintiff should not benefit financially, in the form of accrued interest, from an unexplained delay in the prosecution of a mortgage foreclosure action caused by its predecessor in interest.” Wells Fargo, 231 A.D.3d at 901.

On April 1, 2026, the Appellate Division, Second Department, decided two cases in which the interest awarded to foreclosing lenders was substantially reduced due to delays in prosecuting the underlying foreclosure actions.

HSBC Bank USA, N.A. v. Eherenthal[1]

In 2009, HSBC commenced a mortgage foreclosure action. In 2015, HSBC moved for, and was granted, summary judgment. The borrower appealed and the Second Department reversed, finding that HSBC failed to establish standing due to discrepancies in HSBC’s name. HSBC moved for summary judgment again and the motion court denied the motion, holding that a trial was necessary to address the discrepancy in the lender’s name. Trial was held in 2019 and 2021, after which the referee submitted a report finding that the lender adequately demonstrated standing. However, due to the history of the matter, in which HSBC was afforded numerous opportunities to establish standing, the referee recommended that one and a half years of interest be tolled. The borrower opposed HSBC’s motion to confirm the referee’s report and cross-moved to toll all interest to HSBC from the commencement of the litigation. The motion court granted HSBC’s motion and denied the borrower’s cross-motion.

On appeal, the Court found that the referee properly determined that HSBC had standing to commence the action. However, the Second Department found that interest should be tolled for a longer period than recommended by the referee. Thus, after explaining the law along the lines set forth herein, the Court stated:

Here, the defendants are correct that [HSBC’s] changing theory of the case was responsible for much of the delay in this matter. While the referee recommended, and the Supreme Court directed, that the accrual of interest be tolled from February 14, 2018, … to August 19, 2019, … we find that the accrual of interest should be tolled from August 20, 2015, when [HSBC] first moved, among other things, for summary judgment on the complaint insofar as asserted against the [borrower] and for an order of reference based on submission of prior affidavits and affirmations [addressing the standing issue], to August 19, 2019 [the date the trial was ordered to be held].

Greenpoint Mortgage Funding, Inc. v. McFarlane

In October of 2007, the lender commenced an action to foreclose a mortgage. In November of 2011, the complaint was dismissed. In January of 2018, an order was issued restoring the case to the calendar and directing the lender to move for an order of reference within 90 days. In September of 2022, the lender moved for a default judgment and for an order of reference, which motion was granted in October of 2022. In January of 2023, the lender moved to confirm the referee’s report and for a judgment of foreclosure and sale. The borrower opposed the motion urging that interest should be tolled from November 2011 to September 2022, “due to the plaintiff's delay in moving for a judgment of foreclosure and sale.” Thus, the defendant argued that the “‘[the lender] did not move for an order of reference until September 13, 2022,’ which was not within the 90 days directed by the Supreme Court in the January 31, 2018 order.” The lender’s motion was granted and the borrower’s cross-motion was denied.

On appeal, however, the Second Department found that the referee’s report was properly confirmed. However, the Court held that the borrower’s cross-motion should have been granted and stated:

Here, the [lender] failed to explain its six-year delay in moving to restore the action to the active calendar, and further failed to explain its four-year delay in moving for leave to enter a default judgment against the [borrower] and for an order of reference after the action was restored to the active calendar. Under the circumstances of this case, since the [borrower] was prejudiced by these unexplained delays, during which time interest had been accruing, the interest on the note should have been tolled from November 1, 2011, to September 13, 2022. [Citation omitted.]

Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP.

This article is for informational purposes and is not intended to be and should not be taken as legal advice.

[1] The recited facts are abridged for editorial purposes.