WASHINGTON — Bank of America (BAC) President and Chief Executive Brian Moynihan cheered the ongoing recovery of the housing market on Friday, while warning that any move toward privatizing the mortgage finance system must proceed with caution.

Speaking at a Brookings Institution event on the future of homeownership, Moynihan said that the market is showing overall signs of recovery and noted that "with time, this is working through."

"The No. 1 thing is to get people back to work," he said. "The good news about that on the housing start side is you're starting to see a meaningful pickup in housing construction, which is one of the most stubborn places to get Americans back to work."

He added that "getting through" the available government programs is now preferable to unveiling new ones: "Honestly, it's time, and Americans aren't patient."

Moynihan said that ultimately the country should move to minimize the roles of Fannie Mae and Freddie Mac, which have dominated the market since the financial crisis, but warned that an overhaul of the government-sponsored enterprises will have to be methodical and and that a transition could take "a decade or two."

Republicans have pushed for privatizing the market for years, including incoming House Financial Services Chairman Jeb Hensarling, R-Texas, who is expected to make the issue a priority next year.

"In the near term there's no practical solution other than to continue to participate in the government. Because the reality is with the uncertainty about home values, uncertainty about the process, uncertainty about what the asset for a lack of a better term is, do you think people … outside of America would actually invest?" said Moynihan, during a question and answer session at the event. "I think they should come down to a very small amount, the question is how and when?"

For now, the market is largely focused on a package of regulations to be released by the Consumer Financial Protection Bureau, including the qualified mortgage rule which would set "ability to pay" standards for consumers. Industry observers have said that rule, along with others including pending Basel III regulations, have lenders deeply concerned. Moynihan said navigating some of the new provisions facing the market will be the first hurdle before a discussion about comprehensive GSE reform is possible.

"The near-term need is to finish the discussion around the core aspects of Dodd-Frank," he said. "When you get that done, and have that balanced, then I think it's time to have the discussion. But I think a lot of that has to be about, how do you accomplish the transition, more than what is the end point."

He added that such a discussion could take three or four years "to get it right" ahead of starting to implement any changes to the GSEs and the market. The country would need plenty of lead time for such a transition, he said.

"You're going to have to give lots of warning to America and lots of warning to the markets to do this right. Because you can't change this overnight," he said. "You don't want confidence to go backward because of this."

He also acknowledged that there continue to be areas struggling across the country, and advocated a more micro-level approach to helping those troubled pockets.

"Just in last couple of days we had in all our market presidents from 140 markets around America — and Dallas doesn't know what Detroit's talking about … it's just not in their thought process to think they have a problem with unemployment or housing," Moynihan said. "This has got to be very localized. … I think the availability of credit is fine. It's going to be tight more until you have the rules figured out. As we plan the policy going forward, I think we've got to get a lot more granular by city or by community or by state to figure out what the answer's going to be."

Meanwhile, the increasing complexity of the mortgage process is another hurdle for borrowers, even those with good credit.

"Oddly enough, the biggest impact on the customer is probably the more standard underwriting customer has gone from a very simple process to a complex process because we can't differentiate for higher credit quality, and that's frustrating," he said.

The bank has added an additional 5,000 employees over the last year and a half to the mortgage origination team, "and we're still not doing as well as we should," Moynihan added.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.