President Obama’s chief economic advisor Gene Sperling made a strong call for comprehensive housing finance reform this morning at an event cohosted by CoreLogic and the Urban Institute.

The Obama administration believes that the “risks are simply too great” not to engage in broad reform, Sperling said. That Fannie Mae and Freddie Mac are profitable again and home values are on the rise does not mean that we can stop moving toward reform.

We need to create a system characterized by fair competition among multiple entities, with mortgage-backed securities supported by a fully priced catastrophic government guarantee. If we don't get to that goal, we will revert to a system dominated by government-sponsored entities in which potential competitors would face insurmountable obstacles to entering the market. In that scenario, Sperling warned, the risk is too great that taxpayers will once again bear the cost of financial calamity.

Sperling sees another important benefit of comprehensive reform: its potential to broaden and strengthen the middle class. In his and the Obama administration’s view, this process requires supporting affordable rental housing and making mortgage credit affordable and accessible to all creditworthy borrowers.

“There is more to be done on access to credit,” he said. “Nobody wants to go back to the recklessness that led to this crisis. But we should recognize that the pendulum has swung too far. The credit box is too tight. Too many homes are not getting built."

The Obama administration’s plan for comprehensive reform has several core principles, including putting private capital at the center of the housing finance market, winding down Fannie Mae and Freddie Mac, and providing and protecting widespread access to credit for worthy borrowers, ensuring a nation that is well-housed.

The government must also play a countercyclical role, stepping in to provide access to mortgage capital in times of economic crisis, ensuring that homeowners remain able to borrow. This role will help homeownership remain an important driver of economic growth, both for households and for the broader economy.

Sperling’s “North Star” of reform is creating a broader and more inclusive middle class. Broad-based homeownership and a functional, robust, and stable housing market are critical to that goal.

Photo of Gene Sperling by Matthew Johnson, Urban Institute

Follow Zach McDade on Twitter at @zmcdade