RNPM, LLC v. Alvarez (In re Alvarez), 473 B.R. 853, 860–63 (B.A.P. 1st Cir. 2012) (Boroff, Deasy, Bailey)

Applying § 1322(e) and Puerto Rico law, 10% “penalty clause” in mortgage to cover costs, expenses and attorney fees was subject to equitable reduction from $7,600 to $2,000. “[Section] 1322(e) controls the determination of the amount of pre-petition attorney’s fees which may be included in a secured creditor’s mortgage arrearage claim. . . . [Section] 1322(e) permits recovery of attorney’s fees and expenses only if allowed by applicable nonbankruptcy law. . . . [P]enal clauses in Puerto Rico are ‘subject to the principle of moderation’ under Puerto Rico law. . . . [T]he $7,600.00 penalty imposed under the Mortgage exceeded the $6,400.00 Mortgage arrearage. . . . [This was a] lack of proportion between the penalty and the default of the sort frowned upon by Puerto Rico courts.”

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