A New York court has dismissed a class action lawsuit against Fay Servicing, LLC and Wilmington Trust, National Association, regarding alleged improper calculations of post-judgment interest on mortgage loans. The decision, made by Judge William J. Giacomo of the New York Supreme Court in Westchester County, affects borrowers who claim they were charged interest on amounts that should not have accrued it. The ruling highlights the complexities surrounding mortgage modification agreements and the foreclosure process.

The case, Ramirez v. Fay Servicing, LLC, was filed under Index No. 57297/2026. The plaintiff, Matilde Ramirez, initiated the lawsuit on February 10, 2026, representing herself and others similarly situated. The complaint alleged that the defendants improperly calculated post-judgment interest on a deferred principal balance of her mortgage loan, which was modified under a written agreement. This ruling may have significant implications for how mortgage servicers handle similar cases in the future.

Background

Matilde Ramirez took out a mortgage loan secured by her residence, which was later modified to include a deferred principal balance of $262,868.24. This modification agreement stated that no interest would accrue on this deferred amount. However, Ramirez later became involved in a foreclosure action, where a judgment was granted in favor of the defendants, allowing them to sell her property.

In the foreclosure action, the court determined that the total amount due to Ramirez was $926,627.05, which included both principal and interest. The judgment also mentioned that interest would be calculated only on the principal amount and not on the deferred balance. Despite this, the complaint alleged that the defendants subsequently sought to impose post-judgment interest on the deferred principal balance, which the plaintiff argued was not legally permissible.

The Ruling

In his ruling on April 2, 2026, Judge William J. Giacomo granted the defendants' motion to dismiss the complaint. The court found that the claims were barred by the doctrines of res judicata and collateral estoppel, meaning that the issues raised in the current case had already been decided in the prior foreclosure action. The judge stated, "a judgment of foreclosure and sale entered against a defendant is final as to all questions at issue between the parties, and all matters of defense which were or which might have been litigated in the foreclosure action are concluded."

The court also noted that the plaintiff's interpretation of the loan modification agreement was unreasonable. The ruling emphasized that the defendants had properly calculated pre-judgment interest and that post-judgment interest applied to the entire judgment amount once it was entered. As a result, the court dismissed all five causes of action in the original complaint and also the amended complaint that Ramirez had submitted after the motion was fully briefed.

Impact

This ruling sets a significant precedent for mortgage servicers and borrowers in New York. It clarifies that once a foreclosure judgment is entered, the parties cannot relitigate issues related to the calculation of interest on amounts due under the judgment. The court's decision reinforces the importance of adhering to the terms outlined in mortgage modification agreements and the finality of foreclosure judgments.

Moreover, the ruling may deter similar class action lawsuits against mortgage servicers by establishing that borrowers cannot challenge post-judgment interest calculations if those issues were already addressed in prior actions. This could impact many borrowers who find themselves in similar situations, as they may have limited recourse if their claims are deemed barred by res judicata.

What's Next

While the court dismissed the class action claims, it severed additional claims related to alleged unlawful entry into Ramirez's residence, allowing her to pursue those separately. The defendants have not indicated any intention to appeal the ruling. However, the severed claims may lead to further legal proceedings in the future.