(Corrects ownership status of companies in fifth paragraph)

By JoAnne Allen

WASHINGTON (Reuters) - Fannie Mae and Freddie Mac
should be abolished rather than reformed as part of the Obama
administration's planned overhaul of the government's role in
housing finance, Rep. Barney Frank, chairman of the House
Financial Services committee, said Tuesday.

"They should be abolished," Frank said in an interview
on Fox Business, when asked whether the mortgage giants should
be elements in housing market reform. "They only question is
what do you put in their place," Frank said.

The Federal Housing Administration should be fully
self-financing and Freddie and Fannie should be replaced with a
new mechanism to help subsidize housing, Frank said in the
interview.

"There is no more hybrid private-public," the Massachusetts
Democrat suggested. "If we want to subsidize housing then we
could do it upfront and let the budget be clear about that."

Fannie Mae and Freddie Mac were government-sponsored
enterprises, privately owned companies supported by the
government, until the Bush administration took control of the
companies in 2008 to save them from collapse.

Frank said that he does believe the federal government
should have a role in building affordable rental housing but
thinks money should go toward projects by private developers.

On the question of whether the government should still
provide some guarantees in the mortgage market, Frank said:
"If we have it (guarantees), it has to be self-financed by the
people who are benefiting."

Frank commented after Treasury Secretary Timothy Geithner
convened a Washington conference of housing industry leaders to
hear ideas about reforms for the $10.7 trillion mortgage
market.

The firms' pursuit of growth and profits helped precipitate
the financial crisis of 2007-2009, but their vast resources
also helped minimize its impact.

Together, Fannie and Freddie and the Federal Housing
Administration now back 90 percent of new U.S. home mortgages.

Fannie and Freddie have received $150 billion in taxpayer
bailout money.

In the Fox Business interview, Frank also was critical of
public policy that promoted homeownership at any cost. He also
said the federal government should not be a "backstop" in
guaranteeing mortgages.

"There were people in this society who for economic and,
frankly, social reasons can't and shouldn't be homeowners,"
Frank said. "I think we should, particularly, stop this
assumption that you put everybody into homeownership."

"Public policy has been too much to try to push people into
homeownership."
(Reporting by Joanne Allen; editing by Sofina Mirza-Reid and
Carol Bishopric)