Mortgage market giants Fannie Mae and Freddie Mac would be merged into one company, but would retain their government ties, under federal legislation introduced yesterday by two U.S. House Financial Services Committee members.

Fannie Mae and Freddie Mac, which together with FHA fund 90% of mortgages in today’s market, have come under fire from legislators who believe Fannie Mae and Freddie Mac should be shut down. The housing crisis put extreme financial pressure on the two companies, which required $130 billion in taxpayer support in recent years.

H.R. 2413, the Secondary Market Facility for Residential Mortgage Act of 2011, would merge the two companies into a single entity that would purchase home loans from mortgage bankers, use them to create securities, and guarantee the principal and interest payments backing the securities. The president would appoint a board to run the company.

The bill will ensure that home buyers and home owners have a consistent source of safe, affordable mortgages in all markets and all economic conditions, said NATIONAL ASSOCIATION OF REALTORS® President Ron Phipps

The mortgage market needs federal support, he added. Without it, the U.S. housing finance system would be dominated by a few large too-big-to-fail banks, limiting the options for home buyers as well as home owners who want to refinance, he explained.

“Continuing government participation and establishing an entity that will provide liquidity [mortgage money] during all market conditions will help ensure that qualified home buyers can obtain safe and sound mortgage financing products even during market downturns, when private entities have historically pulled back,” Phipps said.

Source: NAR