The U.S. government announced yesterday that it will implement tighter control on troubled mortgage titans Freddie Mac and Fannie Mae in an effort to save the companies from financial ruin.

Confidence in the companies has faded as property values plummet and mortgage foreclosures skyrocket.

The Federal Housing Finance Agency (FHFA), which regulated the two companies’ transactions, will now run the companies.

The temporary public ownership plan would be the biggest fiscal bailout in U.S. history.

Together, the companies have lent $5.3 trillion of the total $12 trillion of outstanding mortgage debt in the United States and have lost more than $3 billion alone between April and June.

U.S. Treasure Secretary Henry M. Paulson Jr. said in a press release that the FHFA will operate the companies in a “conservatorship.”

Under this plan, the government will guarantee the companies’ debt, bring in new management and provide fresh liquidity to make them less susceptible to the declining housing market.

The Congressional Budget Office said the move could potentially cost taxpayers $25 billion and it would take at least a year to remedy.

Presidential candidates Sen. Barack Obama and Sen. John McCain were briefed about the move this weekend.

McCain immediately backed the action while Obama said he would reserve judgment until he got more details on the issue saying, "We have to protect taxpayers and not bail out the shareholders and management.”

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Tags: bailout, bankruptcy, Fannie Mae, Freddie Mac