WASHINGTON, DC-The Treasury Department dashed any hopes that the GSEs would remain largely intact in their current incarnation with the publication of a blog post by Neal Wolin. Expectations had been raised after the Washington Post ran an article that indicated the Obama Administration had decided to keep an active role in the mortgage finance markets via Fannie Mae and Freddie Mac.

Not so, Wolin wrote. "The Obama Administration believes that the private sector--subject to strong oversight and consumer protection--should be the dominant provider of mortgage credit." The Washington Post, he said, "mischaracterizes a number of the core housing finance reform principles that the Obama Administration laid out in its February report to Congress on the future of housing finance."

The paper, however, is not alone in its speculation that the nation’s capital is losing the heart for radical housing finance market reform. In an earlier interview with GlobeSt.com, Walker & Dunlop CEO Willy Walker noted as much himself. "In Q1 the talk was all about how to wind these things down," he said. "Now I am hearing talk of 'we may need these things [the GSEs] so let’s figure out what to do to reform them and not get rid of them.'"

It is easy to see why and how there is such confusion around Washington’s intentions--never the most transparent of bureaucratic hubs to begin with.

For starters, this is still the early inning of the debate over housing finance reform and, given the current political climate, it is unlikely the parties will take up this issue in earnest before next year's presidential election, Sam Chandan, principal of Chandan Economics, tells GlobeSt.com. "It is not surprising that the administration is exploring various options, at least in private, but there is clearly no consensus on maintaining a large role for government in driving US housing outcomes," he says.

There is also serious question whether the housing market is even ready for a privatized Fannie and Freddie. Recovery in this sector, it hardly needs to be said, is taking a painfully long time.

"The policy response has demonstrated that historically low mortgage rates, coupled with tighter mortgage qualifying criteria, are not enough to spur sustainable demand absent broader stability," Chandan says. "Absent healthier housing demand, private sources of credit will not fully offset a withdrawal of GSE support." At this point in time, if that were to happen, he speculates, it would result in materially higher mortgage financing costs and reduced availability of long-term amortizing mortgages such as the 30-year fixed rate.

Not everyone agrees, of course. Stephen Kudenholdt, co-chair of the Capital Markets practice and partner in the New York office of SNR Denton, for example, supports the notion that the private sector would be able to step in and fund newly originated mortgage loans made under conservative underwriting guidelines, including through securitization. "The main reasons this is not happening already in significant volume, are continuing regulatory uncertainty, plus the pricing advantage that the GSEs continue to enjoy due to their government backstop," he tells GlobeSt.com.