If I were the type investor to panic and run around in circles “like a chicken with his head cut off”, I wouldn’t know which direction my panicky circles should take.

My grandmother used that quote when it was routine for Sunday fried chicken dinners to start with chopping the head from a chicken. Chickens aren’t overly bright and didn’t recognize the loss at first, so tended to run around blindly until reality set in.

You can’t decide which way to run based on advice from investment experts, there don’t seem to be any two of them who strongly agree on anything, including themselves, from one week to the next.

So then….what the heck DO you pay attention to??

With real estate, I think you pay attention to what you need, what you can afford, what kind of risk you can take and what’s happening in your own neighborhood and your own town. That’s about as far as you can know that slice of the real estate market that means anything to you, since all real estate is local in the extreme.

If you bought your house ten or even five years ago and haven’t succumbed to re-fi mania, you can just sit back, you don’t need to do anything, you’re fine. And if you’re not fine? Don’t worry about it, the government is riding to the rescue, according to a news release from Federal Housing Finance Agency (FHFA) Director James B. Lockhart. Really.

It’s probably been all over the news by now, but as I write this (on Thursday), Lockhart has just announced that “Fannie Mae and Freddie Mac will help homeowners…. utilize the new streamlined loan modification program (SMP) announced by FHHA, Fannie Mae, Freddie Mac and HOPEnow. With this suspension, seriously delinquent borrowers may have an opportunity to avoid foreclosure and work out terms to stay in their homes.”

Forgive me if I’m not overly excited, since their previous two efforts are on the verge of being declared busts, according to HUD. The FHASecure program from August 2007 and Hope for Homeowners haven’t made much of an impression on the problem.

And as long as bureaucracy is full of bureaucrats and troubled homeowners gets rescue paperwork it takes a doctorate in chicken feathers to understand, the next program ain’t likely to help, either.

I’ve been on the outskirts of a “short sale” of a house financed by failed lender IndyMac, now owned by the FDIC, and two foreclosures owned by different national lenders and let me tell you, it seems they just DON’T CARE whether the houses got rescued or not.

Not enough to make the sales work, anyway. Local Realtors had solid buyers and submitted offers using the 10-page Georgia Association of Realtors contract, which is produced by a roomful of Atlanta Lawyers with nothing better to do than add words, clauses and pages to cover every eventuality – and these guys waited days and weeks before asking for another 20 pages of THEIR completed forms before they’d respond.

One buyer got tired and left. Another one couldn’t remember the name of his granny’s chickens, or something equally silly, so didn’t survive the paperwork storm and one actually closed.

The funny thing about that last one was that the lender sent their own addendums to be signed AFTER signing the sales agreement, one of which stipulated that the buyer use THEIR out of town attorney at double the local fee.

“Nope,” said the buyer, “I ain’t doing it”, so they folded on that one.

Now here’s what I don’t understand about the two that failed to close: One lender had already taken back one house and the other lender was about to take back the other house, right? And the potential buyers were not only solid, they were a LOT more solid than the previous owners, so WHAT DID THE LENDERS HAVE TO LOSE by selling the houses to them? The worst that could happen would be taking them back and they’d already done that.

Before I get irritated and say something to violate the homeland security act, we’ll break here for the educational portion of the program: Neither Freddie Mac nor Fannie Mae make home loans directly. Fannie is a stockholder-owned, government sponsored enterprise in the business of buying mortgages from lenders and turning them into saleable securities, so that lenders continue to have money to lend.

Freddie, also a government sponsored enterprise, was created in 1970 to expand the secondary market for mortgages for pretty much the same reasons as Fannie, buying mortgages from lenders on the secondary market, pooling them and then selling them as mortgage backed securities to investors on the open market.

Both of them are now broke, partly because they were encouraged and allowed by politicians buying votes to make marginal loans to marginal borrowers to increase homeownership, which was supposed to make them responsible citizens – like earlier homeowners who were able to buy homes BECAUSE they were responsible citizens. But I digress.

The other huge problem was the disconnect between lenders and borrowers. When I got into the real estate business, lenders had a personal stake in whether you paid back the money you borrowed because it was THEIR money.

But if they could sell the loan to Freddie or Fannie and get paid just for making it and then get paid for making another loan and sell that one, while not risking their own money, then whether the loan was repaid or not didn’t hurt them. What WOULD hurt them was running out of borrowers, so standards for borrowers dropped, aided and abetted by Freddie, Fannie and government urgings.

Columnists smarter than I am have called it Y.B.G. and I.B.G. lending: “You’ll be gone and I’ll be gone” before the chickens come home to roost. As granny might say.

Mike Hill has been in the real estate business in Valdosta since 1976 and is marginally old enough to have seen chickens running around headless, much like today’s bureaucracy.