The current financial crisis illustrates the need for the government to provide some form of support or guarantee for the mortgage market, Treasury secretary Timothy Geithner said at the start of a conference on the future of the housing finance system.
This crisis saw a "full retreat" of private market institutions from the mortgage market, he said.
"The challenge is to make sure that any government guarantee is priced to cover the risk of losses, and structured to minimize taxpayer exposure," the secretary said.
The Treasury noted there is no consensus yet on how to design a new system.
However, the Obama administration will not support returning Fannie Mae and Freddie Mac to their former hybrid status of private/public entities.
"This administration will side with those who want fundamental change," Geithner said.
Meanwhile, Treasury wants to begin "weaning" the markets away from government mortgage programs to get the private sector back into the business of providing mortgages.
"As we get though this transition, it is important that consumers maintain access to credit at attractive rates," Geithner said.
The secretary stressed that government will continue to stand behind the GSEs' commitments during this transition and the "planned wind down" of the GSEs' portfolio.
