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Mike Crapo

Key senators agree on plan to replace Fannie Mae and Freddie Mac

WASHINGTON — Congressional efforts to shut down bailed-out Fannie Mae and Freddie Mac took a significant step forward with bipartisan agreement from key senators on a plan to overhaul the housing finance system.

The proposal released Tuesday would slowly shrink the companies and replace them with a scaled-back government guarantee for mortgages. Details are expected to be disclosed in the coming days.

Fannie Mae and Freddie Mac, which together own or guarantee about 60% of existing mortgages, were seized by the federal government in 2008 as they neared bankruptcy from bad loans they guaranteed during the subprime housing boom.

Senate Banking Committee leaders...