WASHINGTON — Although there were sharp disagreements at a Treasury Department conference Tuesday about what kind of role the government should take in the future of housing finance, one idea in particular seems to be gaining momentum: creating an insurance fund to back mortgage-backed securities.

Under a plan advanced by several participants, Fannie Mae and Freddie Mac would be replaced by privately capitalized, federally chartered companies that buy mortgages from the primary market and deliver them into a federally guaranteed mortgage-backed security.

The new companies would pay a risk-based fee used to establish an insurance fund, similar to that of the Federal Deposit Insurance Corp., which would cover catastrophic losses on MBS.

Although details of the plan vary, the idea has won considerable support.

"Any guarantee should be explicit and the government should charge a fee to create a reserve fund to cover potential losses," said Ingrid Gould Ellen, a professor at New York University's Wagner Graduate School of Public Service and co-director of the Furman Center for Real Estate and Urban Policy.

To be sure, others offered differing visions of the GSEs' future, with Bill Gross of Pimco calling for full nationalization and Alex Pollock of the American Enterprise Institute suggesting a more private-market-oriented approach.

But amid the various ideas, the insurance fund was the subject of a surprising consensus.

The basic thrust of the plan involves an explicit, narrowly targeted government guarantee that would be used to cover "catastrophic" losses on certain kinds of MBS. For example, the government would give a guarantee only to 30-year fixed mortgages with significant down payments.

"Public participation should be limited to providing only a layer of guarantee and setting credit standards for tightly defined conventional mortgages behind the borrower down payment, private mortgage insurance, and layers of reserves and capital at whatever future entities play this limited role," said S.A. Ibrahim, chief executive of the private mortgage insurer Radian Group Inc. "Public participation can be paid for through fees and further protect taxpayers through sound underwriting and appraisals, while additionally limiting the government guarantees to a historically safer catastrophic loan-to-value gap of, say, 70% or lower."

The idea has already been endorsed by several groups and companies, including the Housing Policy Council, the Mortgage Bankers Association and Wells Fargo & Co.

Speaking at the conference Tuesday, Mike Heid, president of Wells Fargo Home Mortgage, said a government guarantee is "required to ensure that there's a reliable flow of mortgage credit across the whole wide range of economic cycles we will experience in the future."

"I want to emphasize that the guarantee itself should only apply to the performance of the mortgage security itself," he said. "It should not apply in any shape or form to the particular entity that's involved in the securitization process itself."

Susan Wachter, Richard B. Worley Professor of Financial Management, professor of Real Estate, Finance and City and Regional Planning at the University of Pennsylvania's Wharton School, agreed. "There is a role for a government guarantee that is very limited in successor entities such as Fannie and Freddie," Wachter said. "There should be perhaps successors not solely, in my mind, in the government, but outside the government, with a limited role for a government guarantee with private capital in the first-loss position."

She, too, said the government should not guarantee debt of any new entities, but only the security.

Barbara Desoer, president of Bank of America Home Loans, said the government's role in housing finance needs to be cleared up. Fannie and Freddie were considered implicitly backed by the government, a role that allowed them to sell their debt for cheaper because of a perceived government guarantee but not technically be on the government's books. "The future role for the government must be transparent and clear," Desoer said. "Institutions or products will either need to be explicitly guaranteed or not guaranteed at all."

Although Treasury Secretary Tim Geithner moderated the panel, which included in-depth discussion of the insurance fund idea, he did not take a position on it. Instead, he said he favored some type of government role in housing finance. The administration is due to unveil its own plan in January.

"The question is really about whether the government — in order to make sure that Americans can borrow at reasonable interest rates to buy a house even in a deep recession — has to provide a form of guarantee or insurance against losses," Geithner said. "I believe there is a strong case to be made for a carefully designed guarantee in a reformed system, with the objective of providing a measure of stability in access to mortgages, even in future economic downturns."

The challenge is "to make sure that any government guarantee is priced to cover the risk of losses, and structured to minimize taxpayer exposure," Geithner said.

One participant pushed for a much more substantial role for the government. Gross, a co-founder and co-chief investment officer of Pacific Investment Management Co., said all government programs should be combined into Ginnie Mae. "We should consolidate all of the agencies into one true Ginnie Mae, a government national mortgage association — one agency," he said. "We are skeptical of other public-private models currently being considered, discussed today, because they're more expensive primarily, resulting in higher mortgage rates and therefore favoring Wall Street as opposed to Main Street."

Gross said several options would essentially create "clones" of Fannie Mae and Freddie Mac.

"Private mortgage insurance, for instance, is untrustworthy and comes at a very expensive costs going forward," Gross said. "We need one national agency with sufficient backing, down payments and guarantees going forward."

He was balanced out by Pollock, who said Fannie and Freddie should be split into three parts: a private company that provides a guarantee, a government agency that provides housing subsidies and a liquidating trust to run off continuing losses from the existing GSEs.

One option that does not appear to be on the table: returning Fannie and Freddie to the structure they had before they were seized by the government two years ago. In his remarks, Geithner specifically rejected the idea.

"We will not support returning Fannie and Freddie to the role they played before conservatorship, where they fought to take market share from private competitors while enjoying the privilege of government support," he said. We will not support a return to the system where private gains are subsidized by taxpayer losses."

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