Brian Moynihan, Bank of America's chief executive officer, said that everyone involved in the housing market needs to reset their expectation that everyone can own a home.  In remarks prepared for delivery at the Brookings Institution in Washington, Moynihan said that the government, borrowers and lenders need to look hard at some of the old assumptions and ask if  homeownership the right solution for everyone?"

There must be a different role for government; the GSEs and the FHA need to return to their original mission of helping low- and moderate-income borrowers.

In an interview before his Brookings appearance, Moynihan spoke with CNBC reporter Diana Olick who asking him if concern over the fiscal cliff is influencing the bank and its the mortgage business.

Moynihan said it was impacting businesses.  The uncertainty about fiscal policies in the U.S. started in the summer of 2011 with issues around the default and debt ceiling and continues to the present.  This has led businesses to take aggressive action but perhaps not consumers.   We've not yet seen consumers go backwards but we have seen confidence numbers decline, he said, but he expects consumers, "who have been pretty steady will continue to be there if we get it solved soon."

Asked about interest rates and the mortgage interest deduction, Moynihan said his bank's experts expect rates to stay where they are for a long time but the debate about the deduction will come when the government approaches structural changes around tax reform.    We need to take time to think all these things through, he said.  "I don't think America is ready for massive changes in the core structure taxation overnight.  I don't know if it's (the deduction) on the table or not, but from a consumer's point consumers you would rather have that to come up in the long term.  Right now we have to deal with the past, that is the ills of the housing crisis.

Moynihan said his bank had nearly completed its obligations under the $25 billion settlement it and four other lenders/servicers reached with state and federal governments.  Bank of America has already wiped out $7 billion in mortgage principal and concluded short sales and other remediation programs for 1.5 million borrowers.   The settlement will be mostly complete by the end of the year and entirely complete by February or March, but the bank's programs going forward will provide for similar relief, he said.  "I think we have offered principal reduction to all the people whose loans we own."

Olick asked if he sees private investors getting back into the market in the near future.  Moynihan said it's not a possibility, it's a certainty.  The capital is out there.  As the rate structure moves back to normalized, and as the government cuts back support the private market will come in and start to absorb it.  Long term we've got to get the government part out, the private label in; it is unsustainable as it now is.   When the rules become set over the next months it will all come together.  The investors want the product today; we need to get a product together to give them.

Olick noted that Bank of America has been "winding down" its mortgage business and asked whether it is getting out entirely.  Moynihan replied that, "We're going to be growing the mortgage business for our customers.  We have 30 million checking customers and a low penetration of mortgages.  As we watch this thing shake down from Countrywide (Countrywide Mortgage which the Bank acquired in 2008) and get that behind us, we'll have 5 million, 6 million more mortgage customers. We intend to grow in our production.   It's grown every single quarter and we'll continue to do that."  He said they have changed positioning away from providing wholesale credit to third parties to make mortgages directly.  "We think that's a better position for our company."