WASHINGTON ( TheStreet) -- Leaders in the mortgage market gathered in Washington, D.C. yesterday to discuss the future of government-sponsored entities Fannie Mae and Freddie Mac.

Treasury Secretary Timothy Geithner (pictured above) officially said on Tuesday that the Obama administration was preparing to drive the final nail into the coffin of the Fannie-Freddie model of housing finance. However, "reform...is about more than designing an elegant funeral for Fannie and Freddie," he said. "It requires a broader reassessment of how much support the government should provide for housing finance.

Secretary of Housing and Urban Development Shaun Donovan provided some insight about the future of low-income housing, which his agency focuses heavily upon. His comments seemed more political than policy-driven, though, saying that rental housing "gives those for whom homeownership may not be the best option access to quality housing without undue financial burden."

Bill Gross, who manages a bond fund that has significant exposure to GSE-backed debt at Pimco, predicted calamity if the government exits the mortgage market. "Mortgage rates would be hundreds -- hundreds -- of basis points higher" without a guarantee, he said.

Lewis Ranieri, chairman of Ranieri & Co. and whom the Treasury Department referred to as "the 'father' of the securitized mortgage market," said things went awry when the federal government allowed private investors to dictate the terms of securitization. "In the end, Fannie and Freddie created what they were created to prevent," he said.

Alex Pollock, a well-known policy expert for the mortgage market who is a resident fellow at the American Enterprise Institute, wants the government to completely remove itself from the mortgage market, over the course of time. At the start of his discussion, he cited a modified version of the proverb, "He that is surety for a stranger shall smart for it: and he that hateth suretiship is sure" -- in other words, taxpayers shouldn't be holding the bag for irresponsible borrowers.

Mike Heid, co-president of Wells Fargo's ( WFC) mortgage division, said the banking industry can't do without a government guarantee: "Wells Fargo believes...that an explicit guarantee will be required to ensure a reliable flow of mortgage credit," he said. (Short version: We need the guarantee to keep lending.)

Barbara Desoer, who heads Bank of America's ( BAC) mortgage division, emphasized less the importance of guarantees than rules of the road by which the industry could play upon. She said "there is no long-term need for the GSEs to hold mortgage-backed securities," but that her bank would like a "level playing field for all the participants," a notion that was repeated by others throughout the day.

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-- Written by Lauren Tara LaCapra in Washington, D.C..

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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