America's housing market is creeping along on life support from the federal government.
Of all the mortgages issued in the first half of this year, 89 percent were guaranteed by Fannie Mae, Freddie Mac, or Ginnie Mae, Guy Cecala of Inside Mortgage Finance told me this morning.
In other words, the government is promising to make good if those borrowers don't pay off their loans.
This is the essential context to keep in mind today, as the Obama Administration brings together a bunch of experts to talk about the future of Fannie and Freddie: Government guarantees are the grease that keeps the wheels of the housing market spinning.
Because of bad loans made during the housing boom, Fannie and Freddie have cost taxpayers about $150 billion in bailout money since they were taken over by the federal government in the fall of 2008.
So it's a popular moment to say the government needs to back off from the housing market.
"[T]he government's footprint in the housing market needs to be smaller than it is today," the secretary of Housing and Urban Development said at today's conference.
But it's unclear what the government's role will be.
Guarantee mortgages only for first-time or low-income homeowners? Sell some sort of secondary mortgage meant as a backstop of last resort for a private mortgage market? Reconstitute Fannie and Freddie?
In his opening remarks at today's conference, Tim Geithner gave a vague overview of what he'd like the government's role to be -- basically, continuing to provide some sort of mortgage guarantee:
I believe there is a strong case to be made for a carefully designed guarantee in a reformed system, with the objective of providing a measure of stability in access to mortgages, even in future economic downturns.
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 Obama Administration is supposed to present its proposal for what to do about Fannie and Freddie by the beginning of next year.