The administration said in a statement that it would hold a Conference on the Future of Housing Finance at the Treasury Department on Aug. 17 . It'll seek input for legislation to reform the rules governing mortgage finance and the markets for bonds backed by U.S. mortgages.

The Bush administration placed Fannie Mae and Freddie Mac in government conservatorship in September 2008 . Uncertainty about what to do with them was ostensibly the reason why most Republicans voted against the recent overhaul of financial regulations.

The White House pledged Tuesday to send Congress legislation in January to revamp housing finance.

"The future of our housing finance system is critical not only to our economic recovery, but also to millions of American homeowners in every corner of our country," said Treasury Secretary Timothy Geithner in the statement. "The Obama administration is committed to delivering a comprehensive reform proposal that protects taxpayers, institutes tough oversight, restores the long-term health of our housing market, and strengthens our nation's economic recovery."

The announcement didn't quiet critics.

"Better later than never," said Alex J. Pollock , a scholar at the American Enterprise Institute , a conservative research group. "It is still my opinion that you cannot write a 2,300 page bill and not address Fannie and Freddie on the somewhat dubious excuse that it is too complicated."

President Barack Obama has said he'd tackle Fannie and Freddie, which are both chartered by Congress , separately from Wall Street , reluctant to make significant changes while the housing market remains weak and continues to slow the economic recovery. Existing home sales fell 5.1 percent in June and are expected to decline again this month. Most economic analysts now expect the housing market to bottom in 2011, five years after the crisis began.

Fannie Mae was created in 1938 to boost home ownership after the Great Depression, while Freddie Mac was created in 1970 to provide more competition to Fannie Mae . The two congressionally chartered private entities traditionally buy mortgages originated by lenders and pool them into bonds backed by U.S. mortgages. This frees banks and other mortgage lenders from having to retain the loans on their books, and allows them to keep lending to homebuyers.

Together, Fannie and Freddie guarantee about 31 million U.S. mortgages, collectively representing roughly $5 trillion in mortgage debt.

Early in this decade, Wall Street banks aggressively pushed their own secondary market for mortgage bonds, called private-label mortgage-backed securities. These banks captured significant market share from Fannie and Freddie, in part because lending standards eroded significantly and Wall Street entities had looser controls and fewer demands on mortgage originators than did the quasi-government entities.

Together the Wall Street banks, Fannie and Freddie supported a massive and ultimately unsustainable expansion in homeownership during the first half of the past decade. When the national housing market began to implode in 2006, reverberations shook housing finance to its core and led the government to seize Fannie and Freddie.

Big players in mortgage bonds on Wall Street , namely investment banks Bear Stearns and Lehman Brothers , collapsed in 2008. Investors in Fannie and Freddie mortgage bonds, once thought as safe as Treasury bonds, began clamoring for an explicit government guarantee. These financial instruments were always thought to be implicitly backed by the U.S. government.

Absent an explicit guarantee, investors began to shun this vital secondary market, which is needed for U.S. housing finance to function. Then-Treasury Secretary Henry Paulson concluded that if investors were to get such a guarantee, then Fannie and Freddie should be in government hands.

"Our economy and our markets will not recover until the bulk of this housing correction is behind us," Paulson said on Sept. 7, 2008 , announcing the historic government takeover. " Fannie Mae and Freddie Mac are critical to turning the corner on housing. Therefore, the primary mission of these enterprises now will be to proactively work to increase the availability of mortgage finance" for ordinary Americans.

At the time, Paulson said Fannie and Freddie would buy up even more mortgages in 2009, and then begin to shrink their portfolio of mortgage bonds by 10 percent a year beginning in 2010. However, the housing downturn has been so severe and the crisis in credit markets so deep that the private sector's secondary market remains shut. That's left Fannie and Freddie the only game in town — the only place for mortgage originators to unload their loans in order to keep lending to homeowners.