Thursday, Fannie Mae announced their new “Deed For Lease” program, through which home owners facing foreclosure can deed their property to Fannie Mae in exchange for a 1-year lease (with likely extensions) at current market rates.  This program is expected to only be available to those who have tried and failed at other solutions such as loan modifications or other loan work-out solutions.

Let’s remember that Fannie Mae is an extension of the U.S. Government, therefore what’s actually happening here is that the government is dramatically expanding its role as an owner of private residences.  This continues a trend I exposed to you here back on January 13, 2009.

The questions are:  Is this wise?  Is it legal?  Is it reasonable?

My gut feeling about this is bad.  My inherent bias is that the federal government should have an extremely limited role in our lives, and that’s particularly true when it comes to ownership of homes.

A reasonable point of dissent with my opinion might be that other lenders have the right to do this sort of thing, and that is certainly true.  However, other lenders aren’t owned by the federal government.  (Correction:  Several major lenders now are essentially owned by the federal government, as Obama’s march to socialism continues.)  Non-government lenders don’t have automatic political conflicts of interest in place and are instead subject largely to the demands of the capital markets.  The same is not true of governments, regardless of who is in power.

The cold, hard truth is that the federal government tends to use its financial assets and capabilities as vote-buying leverage.  That’s what welfare is.  That’s what Social Security & Medicare are.  That’s what the new health care legislation will become if passed (God Forbid…)

And the new Deed for Lease program will be just another pawn used by whatever administration is in power.

The government just refuses to learn or accept that it is not all-powerful  For example:  Here we are, months after the Obama administration has pumped hundreds of billions of ’stimulus’ dollars into the economy, and all we have to show for it is the highest unemployment rate in over 25 years, plus a deficit that’s orders of magnitude larger than when Obama took office.  Believe it or not, this isn’t [just] a shot at Obama.  It’s a suggestion that we all need to realize that free market forces are infinitely stronger than any government program, and the real solution here is to step back and allow our economy to heal itself.

One way that could happen is to let the existing system go to work:  When properties face foreclosure, foreclose them.  Sell those properties to the highest bidder.  The new owner has the option of renting the property to the existing occupant.  If it makes sense to do so, it will be done.  If not, then a painful lesson will be learned… but I’ll bet the errors in judgment leading to that foreclosure will not be repeated.

So that’s my laissez-faire capitalist rant for today.  What say you?  Sound off in the comments section below with your thoughts about this… and as always, thank you for reading http://realestate.BryanEllis.com!  (And remember our special webinar this Wednesday night at 9:00 PM ET - more information here.)