The current head of the Federal Housing Finance Agency has proposed a plan that could potentially spur a recovery of the mortgage industry.

FHFA acting director Edward DeMarco's solution is to construct a new system for the secondary mortgage market while contracting activities at Fannie Mae and Freddie Mac.         

"No private sector infrastructure exists today that is capable of securitizing the $100 billion per month in new mortgages being originated," DeMarco said a letter to Congress. "Simply shutting down the enterprises would drive up interest rates and limit mortgage availability."

He also noted that the current lack of key regulations or mechanisms within the secondary mortgage market could cripple the mortgage industry should any government-sponsored enterprise be forced to shut its doors. 

It was proposed that the new secondary mortgage market should be entirely transparent, making is easier for investors, brokers and lenders to access crucial information about borrowers in order to track collateral performance. 

Additionally, DeMarco stated that mortgage servicers should be receiving more attention from the regulators in order to create more competition among private lenders, as an increase in competition could spur an industry recovery.