Although there’s currently about $10 trillion in the mortgage market and 20% of mortgages underwater, values are beginning to slowly inch forward, CEO John Stumpf of Wells Fargo [stock WFC][/stock] told CNN’s Geoff Colvin this week.

However, Stumpf was quick to point out that he’s "bullish on housing" and doesn’t expect the industry to return back to where it once was nor does it necessarily need to. 

Is there any way for the housing market to heal?

Take a look at 1:06 of the clip.


Stumpf is encouraging policy changes to Fannie Mae and Freddie Mac, which would finally get on to what the end state will look like. 

"Freddie and Fannie can’t be in the situation they're in," Stumpf said. "No one contemplated that this conservatorship would go on for three years, four years, five years — innovation stops."

Two key principles need to be set in motion: mortgages need to be good for everyone, ranging from the originator to the borrower, and the government’s involvement needs to be explicit, Stumpf said.

What does this mean for Fannie Mae and Freddie Mac? Do they have a future?

At 2:01, Stumpf immediately proclaims the government-sponsored enterprises do have a future. But, he then back tracks to say that it doesn’t necessarily need to be these two GSEs, but something similar.

Stumpf’s main point is this: there needs to a shift from a portfolio business to a guarantee business. 

"We have $10 trillion in mortgages and there’s only about $10 trillion worth of deposits in the country, we need a secondary market," Stumpf said. "This is an efficient way to put it in the secondary market and get supply and demand matched up."