PIMCO co-founder and co-CIO Bill Gross has called for merging all government mortgage programs into Ginnie Mae and providing a 100% guarantee on government loans.
These government loans would be "protected by adequate downpayments and sufficient mortgage insurance premiums," Gross told a Treasury Department conference on the future of the housing finance system Tuesday morning.
The bond market maven said it is "unrealistic" to expect a robust return of private label securities anytime soon that will provide affordable financing.
The Fannie Mae and Freddie Mac model also is expensive and leads to higher mortgage rates, he feels.
The financial crisis has shown that private mortgage insurance is "untrustworthy" and it will be a "very expensive cost going forward," he said.
Gross also called for a massive refinancing of Fannie and Freddie mortgages to stimulate the economy and prevent a double dip recession.
