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Senate plan aims to overhaul Fannie, Freddie

| Tuesday, March 11, 2014, 8:51 p.m.

WASHINGTON — Congressional efforts to shut down bailed-out Fannie Mae and Freddie Mac took a significant step forward on Tuesday, when key senators announced bipartisan agreement on a plan to overhaul the housing finance system.

The proposal, which will be detailed in the coming days, would slowly shrink the government-controlled companies and replace them with a scaled-back government guarantee for mortgages.

Fannie Mae and Freddie Mac were seized by the federal government in 2008 as they neared bankruptcy from bad loans they guaranteed during the subprime housing boom.

Senate Banking Committee Chairman Tim Johnson, D-S.D., and the panel's top Republican, Mike Crapo of Idaho, said they had reached agreement after a series of hearings last year on how to overhaul the complex housing system and reduce the role of the federal government in backing home loans.

Since the 2008 financial crisis, Fannie, Freddie and the Federal Housing Administration have backed about 90 percent of all new mortgages.

“There is near-unanimous agreement that our current housing finance system is not sustainable in the long term and reform is necessary to help strengthen and stabilize the economy,” Johnson said as he and Crapo released the principles they had agreed should be part of legislation.

The White House praised the announcement as “a good-faith compromise.”

“We support this effort and believe it is a workable bipartisan approach to complete the biggest remaining piece of post-recession financial reform,” said White House spokesman Bobby Whithorne.

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