Washington - The US government was preparing to take over the twin mortgage finance giants known as Fannie Mae and Freddie Mac, dismiss their top executives and prop up the companies with government funds, with an announcement likely as early as Sunday.

The US Treasury has plans to put Fannie and Freddie into a so- called conservatorship, House Financial Services Committee Chairman Barney Frank told Bloomberg financial news agency, after a briefing by Treasury Secretary Henry Paulson on Saturday.

"What they're talking about doing are two things, one is conservatorship and two, putting some money into them. I think it's an important combination," Frank said.

The move appeared to be based on a law passed by the US Congress in early August which also shored up other aspects of the faltering mortgage market that has been undermined by record foreclosures.

Paulson met with executives of the two companies, Federal Reserve chairman Ben Bernanke and Federal Housing Finance Agency director James Lockhart over the weekend.

Fannie and Freddie have suffered 14.9 billion dollars in losses from the widening mortgage foreclosure crisis in the US that has rippled outward to foreign investors. The central banks of many countries, including those in Asia, hold considerable stock in Fannie and Freddie.

The Treasury also briefed Democratic presidential candidate Barack Obama on Saturday and has been in touch with the staff of Republican candidate John McCain, Bloomberg reported.

In a statement issued Saturday, Senate Majority Leader Harry Reid, who also spoke to Paulson, noted: "Fannie Mae and Freddie Mac play critical roles in making ownership of an affordable home a reality for millions of Americans. They are also critical to well- functioning global financial markets."

"This situation is yet another stark reminder that we live in difficult economic times and we must do more to help struggling families reach the American Dream."

In August, Fannie Mae reported a second quarter loss of 2.3 billion dollars, marking a fourth straight quarter of losses. The company recorded a 1.86-billion-dollar gain in the same period a year ago.

Fannie and Freddie together manage nearly half of the 12-trillion- dollar US mortgage market. The two are chartered by the federal government but have publicly traded shares.

The number of new mortgage holders entering foreclosure in the second quarter stood at 1.19 per cent of all US mortgages, the Mortgage Bankers Association said Friday, the first time the rate has topped 1 per cent in the 29-year-history of the association's record keeping.

Last month's new law approved an emergency plan for the twin lenders. At the time, government officials warned that their collapse could plunge the US into a far deeper crisis.

The bill passed in August also allowed up to 400,000 mortgage- holders to refinance into low-interest government loans - effectively guaranteeing 300 billion dollars worth of new mortgages. (dpa)