The Administration knows that housing remains a problem for the economy. And so they’ve proposed a lot of things to do something about that. None of them have worked, of course. But they’re throwing a lot of things up against the wall. The latest is a way to try and get the securitization market rolling again, which seems like a pretty terrible idea.

The Obama administration and a federal housing regulator are considering a program to draw private investment back into the government-dominated mortgage market by having Fannie Mae and Freddie Mac sell slices of securities that wouldn’t carry a federal guarantee but would pay a higher interest rate than current mortgage-backed bonds.

No decisions have been made, but officials believe a small pilot program could be rolled out sometime next year, according to people familiar with the matter.

Officials see it as a step toward reducing the $10.4 trillion U.S. mortgage market’s dependence on government-controlled mortgage companies Fannie Mae and Freddie Mac.

The move would test the willingness of private investors to share the risk of funding home loans that are packaged by Fannie and Freddie. If the program were expanded significantly, it would likely raise mortgage rates over time because private investors would require greater returns than Fannie and Freddie currently do.

The securitization market has basically frozen since the financial crisis. This would be a way to kickstart it by offering a higher yield. But the implicit guarantee would theoretically go away. Of course, there was no on-paper guarantee on all those mortgage-backed securities banks sold during the bubble. But that didn’t stop the government from handing over a bailout in 2008.

Why this all gets funneled through Fannie and Freddie is unclear. They didn’t cause the crisis, but that’s no reason to put them in the position to effect the next one. Who is doing the due diligence on what 5-10% of the security gets passed over to private investors? What does this mean for title ownership? This seems like a hornet’s nest – of very aggressive, stinging hornets – that shouldn’t be stirred up again.

I recognize that this is a way to unwind Fannie and Freddie’s portfolio and return the housing market to private hands. I know a way to do that – have banks give out mortgages that they make a profit on over a 30-year time horizon. There is no divine right to maximize profits through a securitization scheme that proved successful in clouding title and breaking the residential housing market. The way it worked in the past – where you knew your lender and they held onto your mortgage – was actually pretty OK.

Fannie and Freddie could also do this simply by raising the fees they charge to guarantee mortgages. That has the same effect as slicing and dicing a chunk of mortgage securities at a higher rate. And it removes some of the worry that comes with that.