House eyes abolishing Fannie, Freddie

WASHINGTON, Jan. 23 (UPI) -- A House panel is preparing to recommend that troubled quasi-public U.S. mortgage finance firms Fannie Mae and Freddie Mac be abolished, its chairman says.

Rep. Barney Frank, D-Mass., said Friday that the House Financial Services Committee is seriously considering scrapping the giant mortgage guarantors and establishing alternative forms of home financing, The Wall Street Journal reported.

"The remedy here is ... as I believe this committee will be recommending, abolishing Fannie Mae and Freddie Mac in their current form and coming up with a whole new system of housing finance," Frank said, without elaborating. The Journal said he has previously called for folding some overlapping Fannie and Freddie functions into the Federal Housing Administration.

The newspaper noted that the Obama administration has indicated it will issue recommendations on how to revamp the entire U.S. housing finance system when it releases its budget next month after drawing Republican criticism for moving to reform the financial sector without detailing its plans for Fannie and Freddie.

The Journal said financial industry analysts contend it's unlikely the government will abandon a future role in the companies, which guarantee around half of the nation's $11 trillion in home mortgages.