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How to Lose a House Without Really Trying.

Indymac Bank, FSB v. Kesselman et al., No. A-4830-10T4, (N.J. Super. App. April 4 2012) is a case which examines the difficult issue of establishing a defense to foreclosure. Due to the massive volume of foreclosure cases in recent years, many states have set-up programs for mediation which attempt to prevent evictions. These programs have a lofty goal of keeping people in their homes, and should be lauded. What happens then, when the program is unsuccessful?

This case involved the defendant Shalom Kesselman and Indymac bank. Shalom had borrowed $297,000 on September 12, 2002 from Indymac. In order to secure the loan, a mortgage was executed on property located inLakewood,New Jersey. In November 1, 2007, Shalom defaulted on this loan, and between that time and the time in which the case came to court paid no other money towards the mortgage. Furthermore, once in default, Shalom continued to inhabit the home.

Indymac attempted to wait, and filed a notice of foreclosure in February, 2008. Shalom Kesselman failed to file a responsive pleading, thus a default judgment was entered on March 13, 2009. A sheriff's sale was scheduled for June 16, 2009 but was postponed several times. Finally, on February 28, 2011 with the aid of an attorney, Shalom Kesselman moved to vacate the foreclosure judgment.

The argument behind vacating judgment was irregularities in the assignment of the mortgage, as well as lack of proper service of the law suit according toNew Jerseylaw. Both of these reasons, had they been true would have provided a manner in which to vacate the default judgment. The problems for Shalom came, however, at the hearing on April 29, 2011.

At the time of the hearing, Shalom informed the judge of his monthly income, as well as his participation in the mediation program set-up to avoid foreclosures. At the hearing the judge found there was no meritorious defense because service was proper, as was the assignment of the mortgage. Shalom Kesselman then appealed this decision.

On appeal, the court found that service was proper. Shalom's wife was personally served documentation related to the lawsuit. At the same time a copy for Shalom was left with his wife. The judges went on to state that based onNew Jerseylaw service was proper. The crux of the decision was based on the foreclosure mediation program.

The judges noted in the appeal that this mediation process like all dispute resolution processes used is a key part of the judicial process. Thus, when Shalom admitted he participated in the program, albeit unsuccessfully, inadvertently discredited his own claims that he was never apprised of the lawsuit. Furthermore, participation in the process meant Shalom could not allege a lack of due process based on improper service. InNew Jersey, equitable estoppel precludes challenging a foreclosure on improper service grounds if a party has actual knowledge of and participates in the proceedings. The mediation was a proceeding and thus barred challenging the foreclosure suit based on improper service.

The second contention of Shalom in this case is one which has been repeated many times in recent litigation...the "robo-signer." There was a challenge that the mortgage assignment was questionable because it was robo-signed. However, the defendants failed to attach the assignment.New Jerseyrequires that a challenged document such as a mortgage assignment be attached to any appeal. The judges noted the consistent holdings inNew Jerseythat failure to attach a challenged document "renders review impossible." In order to properly challenge an assertion by a Plaintiff, a defendant must present something, thus the defendants undercut their own case.

This case is not intended to show the proper way of foreclosing on a home, but rather the way in which improper defenses can harm you going forward. In this case, Shalom may have had a different outcome had he hired a lawyer earlier in the process or attempted to possess the challenged documents. The point is that the longer the time from the initial action the harder the defense will be to establish.

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