Is this the calm before the Foreclosure Storm?

As in most of America, the law business slows down in the last two month of December. For those of us who represent consumers this is considered the calm before the storm. Most courts are reluctant to grant home foreclosures during the December holidays and most creditors are not inclined to assume the entire “Scrooge” approach so they wait—Until January.

In 2009, there was an unprecedented “truce” called earlier in the year by Wells Fargo and CitiFinancial that brought a temporary stop to foreclosures and now foreclosures are paused in large part due to the holidays. These factors have decreased the number of foreclosures in 2009 as compared to 2008.

The formula of a spring pause in foreclosures, the Holiday Pause in foreclosures plus the market being flooded with foreclosed property has removed most of the incentive for the holders of real estate notes to proceed with foreclosure and/or judicial sale. When supply exceeds demand there foreclosed property is without value.

Never fear, the government is here to help!

While we were away from the computer enjoying our families the United States Treasury lifted the caps on taxpayer bailouts on Fannie Mae and Freddie Mac for the next three years.

This is a signal that Fannie and Freddie are going to need a lot of money in the next three years. While it would be wonderful for the money to be used to benefit homeowners and to maintain the integrity of communities—it is as likely that the funds will be used to subsidize losses experienced by investors in mortgage backed securities.

In my office it appears that the numbers of Chapter 13 Bankruptcies will exceed the number of Chapter 7 bankruptcies filed in early 2010. Most of these are being filed to stop foreclosures. Given this very limited statistical sample it would be wonderful to be able to be able to save homes with the assistance of the Treasury.