The future of mortgage finance is going to look a lot like the past.

That's the view of a group of mortgage experts who argue that, for all the talk about eliminating Fannie Mae and Freddie Mac, the housing market depends on a financing model that includes a government guarantee. Without that guarantee, investors will simply not buy mortgage bonds, the backbone of home loan finance.

"Mortgage rates would be higher and housing prices would be lower without a government guarantee," Dan Hyman, an executive vice president of portfolio management at giant bond investor Pimco, told an audience of realtors on Tuesday at a conference sponsored by the California Association of Realtors. "Any road to a transition from a government guarantee is a very long road."

Possibly complicating any effort to unwind Fannie and Freddie is that, five years after they were bailed out and seized by the government, they could soon start making money for the Treasury. In the second quarter, Fannie's profits nearly doubled from a year earlier, to $10.1 billion, while Freddie's climbed 67%, to $5 billion. They have now repaid the Treasury about $146 billion of the roughly $189 billion in bailout funds they received.

"Over the last few years, Fannie and Freddie have been considered toxic but the more money they make, the less toxic they become," Hyman said.

There are two major bills in the works that aim to reform the government-sponsored enterprises, but the panelists do not expect either will gain traction anytime soon.

The Protecting American Taxpayers and Homeowners Act, sponsored by Financial Services Committee Chairman Jeb Hensarling, R-Texas, would unwind Fannie and Freddie and largely eliminate a government backstop for home mortgages.

The alternative is the Corker-Warner bill, sponsored by Sen. Bob Corker, R-Tenn., and Sen. Mark Warner, D-Va., which would also unwind Fannie and Freddie but would establish a secondary market backed by an explicit government guarantee. That bill would require private capital to take at least 10% of the first loss on mortgage-backed securities, but private investors are cool to the idea of taking the first loss.

"Without a government guarantee, only a small segment of private capital will be coming into the U.S. market," David Min, an assistant law professor at the University of California at Irvine, said at the conference sponsored by the California Association of Realtors.

Since the credit crisis of 2008, only 33 private-label mortgage securitizations have been completed and those have been primarily for jumbo loans to borrowers with high credit scores buying homes priced at above $1 million. Those deals totaled just $15.3 billion in private-label originations — a drop in the bucket compared to the $6.7 trillion in total mortgage securitizations by Fannie and Freddie.

Though some critics of the GSEs have long argued that they were responsible for the collapse of the housing market, Min reiterated that that view has long been debunked. Delinquency rates on private-label mortgage-backed securities, originated mostly by nonbanks during the housing boom from 2003 to 2008, were much higher than those on loans guaranteed by Fannie and Freddie.

For example, loans originated in 2006 and packaged into private-label securities had a 45% delinquency rate compared to a 13% delinquency rate for loans in the same year guaranteed by Fannie and Freddie.

Joel Singer, the CEO of the California Association of Realtors, said reform will hinge on whether lawmakers place a value on homeownership and homebuyers' preference for 30-year fixed-rate mortgages. The common view is that if the private capital controlled the market, 30-year fixed-rate mortgages and would be replaced by shorter-term adjustable-rate loans.

"There is no quick fix to this," Singer said. "To do this right is very complicated and requires answering whether an implicit subsidization of homeownership is what we want. We have a view that housing merits government support."

The powerful housing lobby, led by the National Association of Realtors, has been lobbying for the GSEs to remain as a government agency, which would ensure consumers had access to 30-year fixed mortgages.

"My solution is simple: call Fannie and Freddie something else and move on," Singer said.

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