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Originally published Saturday, September 27, 2008 at 12:00 AM

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Fannie-Freddie exit plan proposed

Fannie Mae and Freddie Mac, the mortgage-finance companies seized by the government this month, would have two years to either return to...

Bloomberg News

Fannie Mae and Freddie Mac, the mortgage-finance companies seized by the government this month, would have two years to either return to profitability or liquidate their assets under legislation being proposed by U.S. Rep. Jeb Hensarling of Texas.

Hensarling, chairman of the Republican Study Committee, said he plans to introduce the bill, which will end federal conservatorship of the companies within two years and require their regulator at that time to appoint a receiver to liquidate assets or allow the companies to return to the private sector with new restrictions.

Hensarling announced the legislation during a House Financial Services Committee hearing Thursday that is being held to examine the Sept. 7 takeover of the companies.

The bill from Hensarling would require the companies to wind down their combined $1.6 trillion investment portfolios by 20 percent annually for three years and would include new capital requirements comparable to national banks, which are nearly four times higher than Fannie and Freddie's current standards.

The legislation would also restrict the size of the loans the companies can buy to local median home prices. The companies' federal charter, which gives them access to lower funding costs and other perks, would sunset after six years, Hensarling said.

Separately, an agreement to reshape the appraisal industry is being delayed up to three months, a federal regulator said Thursday.

James Lockhart, director of the Federal Housing Finance Agency, told the House Financial Service Committee that the agreement with New York Attorney General Andrew Cuomo will be delayed from its original Jan. 1 start date. While the agreement should be finalized in the coming weeks, "it's taken us longer than we expected to do it," he said.

Widespread complaints of problems with the appraisal process and its impact on the housing market led Cuomo to reach a deal in March with Fannie and Freddie, which are regulated by Lockhart.

The agreement will create a watchdog — the Independent Valuation Protection Institute — to monitor the appraisal business. Fannie and Freddie will spend $24 million to create the institute, which will accept complaints from consumers and appraisers. It will also monitor the enforcement and report to Cuomo's office.

Information from The Associated Press is included in this report.

Copyright © 2008 The Seattle Times Company

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