Earlier this week, Senate Democrats voted down a bill that wouldhave essentially dissolved Fannie Mae and Freddie Mac after theirconservatorship period was over. Introduced by Senate RepublicansJohn McCain (AZ), Judd Gregg (NH) and Richard Shelby (AL), theamendment to the financial regulatory reform package would havetaken the GSEs off of taxpayer support and mapped out a plan towind down and dissolve them over 15 years. At the same time, bothGSEs in the past few days have reported substantial first-quarterlosses due to continued weakness in the market. Freddie Mac posteda $6.7-billion net loss, up $2 billion from the prior quarter anddown from $10 billion the same period a year ago. Fannie Mae'sfirst-quarter loss came in at $11.5 billion, down from $15.2billion in the final three months of 2009 and $23.2 billion in thefirst quarter. The losses were attributed to credit-relatedexpenses and the impact of new accounting standards. These lossesresulted in a net worth deficit of $10.5 billion for Freddie and$8.4 billion for Fannie, for which the companies requested acombined $19 billion in additional funding from the Treasury inorder to continue operations. If accepted, that would bring theGSEs' total federal bailout to some $140 billion. The good news formultifamily, though, is that the agencies' losses were primarily onthe single-family and guarantee segments of their business. On themultifamily end, Freddie earned $221 million in the first quarterand Fannie earned $99 million. Those figures are minuscule incomparison to the billion in losses, but they're better thannothing. Another bright spot is that the delinquency rate for bothfirms. Freddie's monthly delinquency rate fell for the first timein three years, to 4.13% in March (down from 4.2% in February) forsingle-family homes and 0.24% for multifamily, down one basis pointfrom February. Meanwhile, Fannie's serious delinquency rate (thatis, loans that were more than 90 days late) rose from 5.38% in thefinal quarter of 2009 to 5.47% in Q1. Although it registered anincrease, Fannie officials said the figures show a slowing growthrate of delinquencies. The improvement reflects the willingness oflenders to do workouts with borrowers, but with the continuedweakness in the economy and the number of underwater mortgages outthere growing, I don't see how this could be a long-lasting trend.It's safe to say Congress is stuck between a rock and a hard place.On one hand, the mortgage giants played a large role in the housingmarket's downturn and the bailouts, which have been sharplycriticized, seem to be growing. On the other hand, it's no questionthat financial support from both Fannie and Freddie is also theprimary-if not sole-reason the housing market hasn't completelyimploded.