updated 10/20/2008 7:08:56 PM ET 2008-10-20T23:08:56

The new chief executives of Fannie Mae and Freddie Mac are trying do more to stop the home foreclosures hammering the housing market, but said it still might take years for real estate to recover in some cities.

"I don't think there is any magic bullet in regards to overbuilt markets" like Miami and parts of California, Nevada and Arizona, said Freddie Mac CEO David Moffett at the Mortgage Bankers Association's annual convention Monday.

Fannie Mae CEO Herbert Allison — seated next to Moffett during an hour-long discussion — touched upon similar themes during his comments. He also assured the crowd of lenders that Fannie Mae is open to all ideas for tackling the myriad problems facing the industry.

"Anything that is not necessary under the old traditions, we are going to discard," Allison said.

Both Moffett and Allison were hired seven weeks ago after the U.S. government bailed out Freddie Mac and Fannie Mae, which own or guarantee about $5 trillion of the nation's outstanding mortgages — nearly half of the home loans the United States. The mortgage finance agencies are operating in a conservatorship that enables the government to inject up to $100 billion in each company in exchange for ownership stakes of almost 80 percent.

The two companies have applied to manage some of the mortgage assets under a $700 billion government rescue program for the financial system that Congress passed on Oct. 3, a person familiar with the matter said Monday. The person declined to be identified because the companies' bids are not yet public.

Treasury Department spokeswoman Jennifer Zuccarelli declined to comment, saying "we aren't confirming any of the applicants." A spokeswoman for the Federal Housing Finance Agency, which regulates Fannie and Freddie, also declined to comment.

Since taking the reins of their new jobs, Moffett and Allison said they have been focused on renegotiating the terms on thousands of mortgages that borrowers can no longer afford to repay. By doing so, Fannie Mae and Freddie Mae hope to prevent more foreclosures that would add to the glut of for-sale homes that has driven down prices.

Fannie Mae has prevented about 300,000 foreclosures so far this year, Allison said, but "that is not good enough. We need to ramp up our activities."

Without providing specifics, Moffett said Freddie Mac also has been working on new approaches to averting foreclosures. "We are working hard to keep people in their homes and to keep people from giving up on housing."

But both Allison and Moffett conceded it's not realistic to expect all delinquent borrowers to be saved from a foreclosure, partly because so many home loans have been bundled into complex packages or securities that are now owned by institutional investors around the world.

And in some cases borrowers shouldn't be given a break because they were speculating on real estate as an investment instead of buying a place to live, said James Lockhart, the director of the Federal Housing Finance Agency.

Those reasons, though, haven't placated mortgage industry critics who believe lenders should be forced to be more forgiving, particularly now that the government has agreed to spend more than $1 trillion to rescue Fannie Mae, Freddie Mac, insurer American International Group Inc. and hundreds of banks around the country.

Protesters rallied outside Monday's convention to urge more foreclosure relief. One woman managed to slip past security to confront Allison and Moffett on stage about the country's foreclosure epidemic. After calling for a moratorium on all foreclosures, the woman was escorted off the stage without incident.

The mood among bankers in attendance Monday was somber, hardly a surprise given the industry was the epicenter of a financial crisis that is expected to shove the economy into its worst recession in a quarter-century.

John Courson, the Mortgage Bankers Association's chief operating officer, said it felt like a tornado had swept through the industry and transplanted lenders to a surreal place.

Craig Hyman, who runs a mortgage bank in Great Neck, New York, said nearly everyone in the industry is still worried about what might go wrong next. "It's just very bleak," Hyman said.

But Idaho mortgage banker Annette Alonso said she is hoping the worst is over. "I think we are finally getting away from all the craziness."

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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