Treasury officials and other government regulators are meeting with Fannie Mae and Freddie Mac executives this week to review the implications of a possible rescue of the struggling mortgage giants, sources told The Wall Street Journal and FOX Business on Wednesday.

FOX Business reported Wednesday that James Lockhart, the director of the Federal Housing Finance Agency, has returned early from a two-week vacation to deal with swirling rumors related to Fannie (FNM) and Freddie (FRE) and to meet with Treasury officials. 

The FHFA is a government agency created in July that includes among other agencies the Office of Federal Housing Enterprise Oversight, the chief regulator of Fannie Mae and Freddie Mac.

The new developments are in addition to the report that Treasury officials have met with Freddie and Fannie officials to discuss what possible structure a government intervention might take if it becomes necessary, according to The Wall Street Journal.

In July, Congress authorized Treasury officials to take an equity stake in the government-sponsored enterprises or loan them a potentially unlimited sum of money to rescue them from a financial collapse.

The publicly held mortgage companies have seen their shares plunge this week as rumors fly around trading floors that the Treasury might actually have to use that authorization.

Both companies have issued statements this week to assure investors not to worry. It hasn't helped. 

Fannie Mae Chief Executive Daniel Mudd said on National Public Radio that "Fannie Mae has more capital than it has ever had in its history" and it has not been offered help by U.S. Treasury officials. 

What a bailout for the two mortgage giants will look like is unclear at the moment. According to Barron's, who issued a report this weekend for Fannie and Freddie, a possible structure would consist of the government purchasing massive quantities of preferred stock in both companies. 

Preferred stocks are convertible investments that are often first in line to get paid off if a company goes bankrupt. Quincy Krosby, chief investment strategist at The Hartford, said the government would likely use convertible stock because it has the highest chance of providing the necessary liquidity to Fannie and Freddie, while also providing the best chance of taxpayers getting their money back or even turning a profit.

While that would provide a guarantee to a taxpayer, it would essentially ruin the value of  the common stock, securities experts said. That’s why the current shares of Fannie and Freddie have lost nearly 80% of their value this year.

“Common shareholders are usually the last in the line behind preferred shareholders,” said Charles Whitehead, a securities law professor from Boston University.

Vicki Tillman, a credit analyst with Standard & Poor’s who watches the two mortgage companies, believes the market has overreacted to the problems at Fannie and Freddie.

“We have stressed the possible losses to their furthest extents and they still are above the adequate capital levels needed,” Tillman said. “People have taken the government plan announced last week and have begun to read into it. It is what it is. It’s just market speculation.”

S&P currently rates the two companies at a “A-“ rating. They were downgraded last month when the government issued their plan.