Fannie n Freddie going away?

The Obama administration laid out three broad options Friday for reducing the government's role in the mortgage market. (The government currently owns or guarantees more than 90 percent of new mortgages). All three of the options would almost certainly lead to higher interest rates and costs for borrowers.

The administration said the government should withdraw its support for the mortgage market slowly, over five years or more, winding down the troubled mortgage giants Fannie Mae and Freddie Mac.

But rather than making a single recommendation, the administration offered Congress three scenarios and will let lawmakers shape the final policy.

The options are:

-- No government role, except for existing agencies like the Federal Housing Administration.

-- A government guarantee of private mortgages triggered only when the market is in trouble.

-- Government insurance for a targeted range of mortgage investments that already are guaranteed by private insurers. The government guarantee would kick in only if those private companies couldn't pay.

The private sector will assume a greater role in housing finance under all of the options.

The bailouts of Fannie and Freddie have so far cost taxpayers nearly $150 billion.

A near-complete withdrawal by the government probably would end the popular 30-year fixed rate mortgage or, at least, make it more expensive. Banks would prefer adjustable-rate mortgages that would fluctuate with the markets.

Administration officials said the proposals will end the hybrid model of public-private companies that left the public on the hook for billions when Fannie and Freddie failed.

Issued jointly by the Treasury Department and the Department of Housing and Urban Development, the plan suggests several short-term measures that would effectively increase the cost of taking out a government-backed mortgage. Other financing options would become more competitive, drawing private dollars back into the market.

These include reducing the maximum size of mortgages purchased by Fannie and Freddie by more than $100,000, to $625,000, by October. The companies would require 10-percent downpayments for all loans. And the fee for the government guarantee would increase.