U.S. lawmakers on Wednesday will open a debate that has stymied them for at least a decade: the future of Fannie Mae and Freddie Mac, the giant housing finance agencies nearly felled by the credit crisis.

Congress is facing the daunting task of remaking the companies after steep mortgage losses led the Treasury in September to seize control of the two financing agencies. The stakes are high, with President Barack Obama counting on the reach of Fannie Mae and Freddie Mac to carry out his plans to improve housing affordability for nine million Americans.

Decisions made by Congress will affect the U.S. housing market for years to come. President Franklin Roosevelt's creation of Fannie Mae in 1938 to develop the mortgage market during the Great Depression helped standardize the 30-year fixed-rate mortgage in the United States and generate a massive expansion in homeownership -- to 66 percent in 2000 from 44 percent in 1940.

With the housing market now facing more than a 30 percent drop in home prices since 2006, and record foreclosures, the task of finding common ground between public roles and private enterprise will stretch into the next decade, analysts said.

What lawmakers and regulators agree is that Fannie Mae and Freddie Mac probably can't retain traditional models that long rewarded shareholders at the risk of taxpayers. Since their government takeover last year, Fannie Mae and Freddie Mac have already accepted $85 billion in taxpayer funds out of a pledged $400 billion.

All options will be considered in debate that has no expected timeframe for resolution, said Paul Kanjorski, the Pennsylvania Democrat who chairs the U.S. House subcommittee holding the hearing.

This is not something that we should make sudden turns and changes on, since Fannie Mae and Freddie Mac are essential to the housing recovery, Kanjorski said in an interview.

With all their imperfections, I'd rather live with those in the short- to medium-term to get the economy back.

The companies' grips on the housing market has increased over the past year as the financial crisis deepened, knocking out Wall Street investors and other competitors who previously provided alternative financing for housing.

Fannie Mae and Freddie Mac own or guarantee some $5 trillion in mortgages, about half the U.S. total.

The companies earn billions of dollars in revenue on debt-financed mortgage investments and fees for guaranteeing payment to investors on mortgage-backed securities they issue. Stockholders were virtually wiped out in September as the U.S. pushed the companies into government conservatorships, though Fannie Mae and Freddie Mac issue billions of dollars in debt each month on the perception that they will be supported by the U.S. Treasury Department.

The central role of the companies in providing vast amounts of lending to consumers has helped them in the past ward off attempts to break government ties. The connection to Congress though charters to support housing, and influence on lawmakers, have also kept significant policy changes at bay.

In one example, a Treasury official's suggestion to cut a government credit line was short-lived, after investors fearing the move pushed GSE borrowing costs to then-record highs.

Now, the Obama administration has enlisted the companies to extend more financing to homeowners who have found the value of their homes drop below the balance of the mortgage, and to modify high-risk loans that are fueling foreclosures.

Once the government gets into something, it's very difficult to get out, said Thomas Lawler, founder of Lawler Economic and Housing Consulting in Leesburg, Virginia.

Peter Wallison, the American Enterprise Institute scholar who argued in 2004 that privatization was the only viable way to protect taxpayers and the economy, said Fannie Mae and Freddie Mac must continue to exist because Congress has not seriously proposed alternatives to take up the slack at a sensitive time for the economy.

The companies may be operating in conservatorship for another four to five years, he said.

No one is going to get serious about Fannie and Freddie, and what will happen to them, until we solve the current crisis, he said.

Pennsylvania Freddie mac Barack obama Fannie mae