From Bloomberg

The FHFA will take over Fannie and Freddie under a so- called conservatorship, replacing their chief executives and eliminating their dividends. The Treasury can purchase up to $100 billion of a special class of stock in each company as needed to maintain a positive net worth. It will also provide secured short-term funding to Fannie, Freddie and 12 federal home-loan banks, and purchase mortgage-backed debt in the open market. ...

Under the plan, the Treasury will receive $1 billion of senior preferred stock in coming days, with warrants representing ownership stakes of 79.9 percent of Fannie and Freddie. The government will receive annual interest of 10 percent on its stake.

As a condition for the assistance, Fannie and Freddie eventually will have to reduce their holdings of mortgages and securities backed by home loans.

The portfolios ``shall not exceed $850 billion as of Dec. 31, 2009, and shall decline by 10 percent per year until it reaches $250 billion,'' the Treasury said. Fannie's portfolio was $758 billion at the end of July, and Freddie's was $798 billion. ...

While common stockholders of Fannie and Freddie won't be eliminated under the conservatorships, they will be last in line for any claims, Paulson said. Preferred shareholders will be second in absorbing losses, he said. ...

The plan doesn't answer all of investors' questions about the companies' long-term prospects. It also doesn't address the question of whether the companies will be nationalized, privatized, or kept as government-sponsored enterprises that are shareholder owned. Paulson said that ``only Congress'' can tackle the ``inherent conflict'' of serving shareholders and a public mission.

Congress has long avoided making major changes to the two companies, which have had extensive lobbying operations. Lockhart said today that those operations will cease.

``All political activities -- including all lobbying -- will be halted immediately,'' Lockhart said. ``We will review the charitable activity.''

Starting with a $5 billion purchase this month, the Treasury will buy new mortgage-backed securities from the two companies, in an effort ``to broaden access to mortgage funding for current and prospective homeowners,'' according to the Treasury.

The Treasury will hire independent asset managers to purchase and run the portfolio of mortgage-backed securities it will buy. ``There is no reason to expect taxpayer losses from this program, and it could produce gains,'' the department said. ...

This does not mean credit write-downs have ended nor that home prices have stopped falling.