While talks around the water cooler that the majority of the market wants private capital to make its comeback in the mortgage finance system, the theory looks better on paper.

Mortgage experts took turns tossing in their two-cents during the Bipartisan Policy Center’s conference Tuesday, admitting that the uncertainty of volume and price in the capital market has left private-sector participants hesitant from entering back into the system.

"The credit risk is undeniable manageable, but the leverage required for government securities is missing from the private sector and steering investors away," said American Capital Agency Group president and chief investment officer Gary Kain.

On a similar note, small wholesale banks are trying to determine if they want to stay in the mortgage market as the uncertainty of new compliance issues continues to loom.

"The problem is by trying to solve too-big-to-fail, we’ve created too-small-to-survive," explained Terry Smith of Federal Home Loan Bank of Dallas.

He added, "Until you get clarity on compliance you’re going to have to a lack of commitment by community banks to the system, which will be an issue in suburban areas."

Nonetheless, private-label securitization optimism is warranted when taking a look at various sectors contributed to agency mortgage-backed securities, specifically mortgage real estate investment trusts.

Additionally, mREITs have attracted roughly $30 billion to $40 billion of capital into the market, Kain pointed out.

However, investors must be cognizant that there are limits to the process, specifically the market must be aware of the credit risk that remains in place on the amount of capital that is not receiving any type of government guarantee.

Rohit Gupta of Genworth Financial firmly believes that mortgage insurers could play a greater role in the market and reach a scale of being one of the entities that absorbs the credit risk.

However, the question going forward is going to be the cost of capital and how this will impact mortgage rates going forward.

"You can bring private capital in and move the GSEs to a shell where they are creating securities and where they are not using their portfolios and not taking much of the credit risk. We can get there as long as we continue on the path that Ed DeMarco has laid out," Kain concluded.