AP

Freddie Mac's request for an additional $10 billion in aid from the Federal Government, coming at the same time that the current and former Treasury Secretaries testify before the Financial Crisis Inquiry Commission, has debate swirling once again around GSE reform. 

Let me preface by reiterating what everyone from Secretary Tim Geithner on down has said: It isn't going to happen any time soon because of the fragility of the housing market.

But it's just that fragility that we have to dig into a bit deeper, and you find it in the Executive Summary section of Freddie's 10Q.

I was alerted to this by the office of Congressman Darrell Issa (R-CA), the ranking member of the House Committee on Oversight and Government Reform, who has been highly critical of the Administration's housing bailout.

From the Freddie 10Q: Mortgage and credit market conditions remained challenging in the first quarter of 2010. A number of factors make it difficult to predict when a sustained recovery in the mortgage and credit markets will occur, including, among others, uncertainty concerning the effect of current or any future government actions in these markets. We estimate that home prices decreased nationwide by approximately 0.9% during the first quarter of 2010 based on our own index of our single-family credit guarantee portfolio. Our assumption for home prices, based on our own index, continues to be for a further decline in national average home prices over the near term before any sustained turnaround in housing begins, due to, among other factors:

• our expectation for a significant increase in distressed sales, which include pre-foreclosure sales, foreclosure transfers and sales by financial institutions of their REO properties, due in part to HAFA. This reflects, in part, the substantial backlog of delinquent loans lenders developed over recent periods, due to various foreclosure suspensions and the implementation of HAMP. We expect many of these loans will transition to REO and be sold in 2010. This may cause prices to decline further as the market absorbs the additional supply of homes for sale;

• the April 2010 expiration of the federal homebuyer tax credit;

• our expectation that mortgage rates may increase in 2010, which will make it less affordable to buy a home; and

• the likelihood that unemployment rates will remain high.

There is definitely more demand and more confidence in the housing market today than there has been in a long time, and that is causing more organic home sellers to finally bite the bullet and put their homes up for sale, not because they have to, but because they want to. While inventories historically always rise in the Spring, this Spring the increase is nearly twice the norm. Add that to the shadow supply that Freddie's report suggests is working its way through the government's flawed loan modification program, and you can see where home prices will still be under considerable pressure.

So while Republicans try to jam GSE restructuring onto the financial services reform bill, the fact is that tinkering with those two at this point in housing's shaky recovery would be something close to negligent. 

Face it, there is not much propping up the housing market today, outside of the government; pulling the government out of the mortgage market at this point is a great debate, but that's all it can be, a debate.

• Slideshow - The Best US Cities to Buy a Foreclosed Home

Questions?  Comments?