To “Foreclose” in the original sense means “bar someone from redeeming a mortgage”. It means to stop, prevent, rule out or prevent a course of action, in this case, prevent the mortgagee (home owner) from redeeming (making good) his mortgage and take possession of the mortgaged property. The word comes from Latin “for” meaning in this case “out” plus “clore” to close.
This is a right that is stripped from the homeowner in favor of the lender, then and only then can the lender take possession of the homeowner’s property. In other words, the homeowner has the right to make his mortgage good unless a foreclosure has taken place.
You cannot buy a foreclosure, you could only buy a foreclosed property. This is why homeowners get deluged with letters from investors and lawyers before their right is taken away by the bank. Up until the very last minute, the homeowner can transfer or sell his rights to someone else.
Most property owners do not realize that they have rights until the very last moment. Even more so given today’s rampant fraudulent conduct by lending institutions. If the lender takes this right away in a fraudulent manner, which is alarmingly being the case in California and many other States, even after foreclosure has taken place, the property owner still has a fighting chance of getting his/her house back.
One of the problems is that by the time the foreclosure is imminent, most homeowners have already given up. After all, they think, they really owe the money, are behind and there is no way they can pay their mortgage, so why should they fight it?
The short answer is because you can win back your house and make a new deal with the bank that you can afford.
Banks have a series of illogical patterns of conduct and internal policies, to them this is normal business practices. These ways of doing business that they call “banking policies” has them cornered into behaving this way, example:
A homeowner is behind in payments, solution, charge him penalties and rack up his interest rate since now he is a “risky borrower” or better still, if he cannot pay, make the whole loan due immediately.
No one stops to think “gee if this guy cannot pay, charging him more and making the entire loan due now, is it going to get us closer to getting our money?”
What about the bank that declines a short sale at $500,000 only to auction the property at $400,000?
Don’t these people have diplomas? Aren’t they supposed to be smart? At the very least, aren’t they supposed to be acting in the bank’s best interest?
It is a twisted reality that even though most bank executives are smart, they have extensive training, experience, diplomas and many mean good, the system of rules they have created has entrapped them into making illogical decisions which MUST be made, in theory to protect the Bank’s interests, but in actuality they stifle, impede and ruin the Bank’s clients and otherwise sound deals which would have made money.
This is why the Bank will not listen to you, will not see your point of view, will not work with you, because its very DESIGN does not allow it to do so.
Their solution? Semantics.
Example: the foreclosure arm of Bank of America, which forecloses on people, destroys neighborhoods and sells the homes is called “Reconstruct” I guess “Destruct” didn’t sound good. Keeping you mired in endless paperwork until they get around to foreclose on you is called “loan modification”. When you try to short sale a home, Bank of America uses a service called Equator, a web interface to process short sales. The system is full of platitudes: have a nice day, we are here to serve you, etc… etc… Reality, I have spoken to employees who can barely speak English unable to take decisions and barely able to write a sentence in good English. You are assigned a “negotiator” who does not negotiate at, rather he/she is there to communicate with you as little as possible and follow a strict set of illogical rules.
This is why you have to fight. It is only when you have run through the full gamut of the system’s “solutions”, platitudes and they still cannot get you, when everything has failed (at least from their point of view) that they will throw your case on someone’s desk to finally handle it. That person will listen to you because that is his/her job.
At this point there is nothing else they can throw at you, this is when they finally assign a human being to listen to you and try to come up with a solution. Many times you can only get to this point after litigation which means you have to take them to court, it is expensive, time consuming and not guaranteed. However, most major Banks have behaved in such an unethical, fraudulent and indiscriminate way, that the tide -at least at a local level, has turned against them. More and more judges are willing to listen to you and more and more lenders are settling cases with homeowners in terms they can afford.
Why don’t they do this from the start? Saving countless manpower, thousands of dollars and endless worries and suffering? Because they can’t.