WASHINGTON — The Obama administration's plan to gradually dissolve ailing housing giants Fannie Mae and Freddie Mac and to shrink the government's role in the mortgage market drew praise from House Republicans on Tuesday. The GOP chairman of the House Financial Services Committee called the proposal a good starting point for bipartisan negotiations over a housing overhaul.

The positive reaction came as Treasury Secretary Timothy Geithner told the committee that the Obama administration wants Congress to approve legislation within two years that would slowly dismantle Fannie and Freddie.

"Our hope is Congress will work with us to find a consensus for a long-term solution," Geithner told the lawmakers.

The positive words came at a hearing held three weeks after the Obama administration released a report calling for a stark reduction of the federal role in housing. The nation's housing market has been battered in recent years by low home prices and vast numbers of foreclosures, and politicians from both parties want to find a way to have private lenders — not the government — bear more of the burden.

"You don't want to run a system where the taxpayer is on the hook when things go bad," Geithner said.

Even so, it is unclear whether major legislation such as this could be approved during next year's presidential election campaign, when partisan divisions intensify.

Fannie and Freddie guarantee or own about half of all U.S. mortgages. Along with other federal agencies, they played a role in nearly 9 of 10 new mortgages over the past year, as private lenders have remained nervous about making new loans. The two companies nearly collapsed in 2008 as the housing market crumbled, but have been kept alive with $150 billion — so far — in taxpayer dollars.

As part of its plan for slowly eliminating Fannie and Freddie, the administration wants to lower the size of mortgages they can buy and raise the fees it charges — proposals designed to help private lenders move back into the mortgage market.

"The cost of a mortgage is going to be higher in the future," Geithner said.

In a written statement aides distributed at the hearing, committee Chairman Spencer Bachus, R-Ala., said the administration had included many GOP ideas in its plan.

"House Republicans are ready and willing to sit down with you, Mr. Secretary, and other administration officials, and our Senate colleagues as soon as possible to craft legislation to produce a comprehensive housing finance reform plan," it said.

Rep. Scott Garrett, R-N.J., another member of the committee, also noted the common ground between Republicans and the administration's plan, including the phase out of Fannie and Freddie and the move toward a privately financed mortgage system.

"I believe there is an opportunity for us to reach broad based consensus," Garrett said.

Democrats, many of whom have worried that the administration plan will make it harder for many families to get mortgages, spent less time praising Geithner.

The top Democrat on the committee, Rep. Barney Frank, D-Mass., criticized Republicans for failing to rally behind a single bill overhauling Fannie and Freddie, noting that the GOP criticized Democrats severely last year when the two companies were ignored by the financial overhaul law they enacted.

And Rep. David Scott, D-Ga., suggested the administration's plan might risk a situation where the private lending market does not provide enough money for the demand for mortgages.

Geithner warned the committee that a failure by Congress to enact legislation in two years would worry the financial markets and leave serious problems unaddressed.

In an apparent warning to some Republicans who want to quickly pull the government out of its role in supporting the mortgage system, Geithner also warned in his prepared statement that acting too fast would hurt as well.

While we are confident that the steps we have laid out follow the right path, haste would be counterproductive — possibly destabilizing the housing finance market or even disrupting the broader recovery," Geithner said.

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Congress is trying to decide how to reshape the federal role in the housing market, which remains weak, with low prices and huge numbers of foreclosures in Florida, parts of the Southwest and other regions. While both political parties concede that changes are needed to protect taxpayers and revive private lending, Republicans tend to want to move more strongly while Democrats express more concerns about maintaining the government's role in helping lower-income families.

To wind down Fannie's and Freddie's roles in the market, the administration also wants to take steps for which it does not need congressional action, such as decreasing the size of loans the two companies may buy. Geithner also reiterated administration plans to constrict the Federal Housing Administration's role in making loans. Some Democrats and consumer advocacy groups have complained that such actions will make it harder for many families to purchase homes.

The administration's report offered three options for overhauling Fannie and Freddie. One would limit the government to helping poor and middle-class borrowers through agencies like the FHA. The second would have the government back private mortgages, but mostly during times of economic crisis. The third would have the government "reinsure" some mortgage investments that are already guaranteed by private insurers.

The two companies buy mortgages from banks and other primary lenders, package them together and sell them with a guarantee that investors would be repaid in case of default. That system helps keep interest rates lower and provides lenders with fresh cash to make additional loans.

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