The government's planned takeover of Fannie Mae and Freddie Mac, expected to be announced as early as this weekend, came together hurriedly after advisers poring over the companies' books for the Treasury Department concluded that Freddie's accounting methods had overstated its capital cushion, according to regulatory officials briefed on the matter.

The proposal to place both mortgage giants, which own or back $5.3 trillion in mortgages, into a government-run conservatorship also grew out of deep concern among foreign investors that the companies' debt might not be repaid. Falling home prices, which are expected to lead to more defaults among the mortgages held or guaranteed by Fannie and Freddie, contributed to the urgency, regulators said.

The details of the deal have not fully emerged, but it appears that investors who own the companies' common stock will be virtually wiped out; preferred shareholders, who have priority over other shareholders, may also end up with little. Holders of debt, including many foreign central banks, are expected to receive government backing.

A government bailout could cost taxpayers around $25 billion, according to the Congressional Budget Office. Treasury Secretary Henry Paulson and two other regulators are working on a plan to put the mortgage finance companies into a conservatorship and remove Fannie Mae CEO Daniel Mudd and Freddie Mac CEO Richard Syron, Rep. Barney Frank, D-Mass., the chairman of the House Financial Services Committee, told The Associated Press.

The government is expected to control the two companies at least a year as it evaluates and debates whether Fannie and Freddie should remain government-run entities or be restructured in some fashion, Frank told the AP.

The takeover plan comes after a rescue of the investment bank Bear Stearns, which was sold to JPMorgan Chase in a deal backed by taxpayer dollars. Already, the housing crisis has cost investors and consumers hundreds of billions of dollars.

News of the likely government takeover on Friday followed a report by the Mortgage Bankers Association that more than 4 million American homeowners with a mortgage, a record 9 percent, were either behind on their payments or in foreclosure at the end of June, The Associated Press reported. That confirmed what investors saw in Fannie and Freddie's recent financial results: Trouble in the mortgage market has shifted to homeowners who had solid credit but took out exotic loans with little or no proof of their income and assets, according to the AP.

Telling the candidates

In a briefing with Sen. Barack Obama late Friday, Treasury Secretary Henry Paulson described plans to seize Fannie Mae and Freddie Mac, possibly as early as today, McClatchy Newspapers reported.

Paulson told Republican Sen. John McCain that Fannie and Freddie would be seized and placed under temporary control in one of the largest government bailouts ever. The move is expected before Asian markets open Monday, which is tonight on Eastern Daylight Time.

McCain on Saturday called for the eventual elimination of Fannie and Freddie, complaining they have become so large and poorly managed that they pose a risk to the broader financial markets, McClatchy reported.

McCain, an Arizona Republican, promised to get "real regulation that limits their ability to borrow, shrinks their size until they are no longer a threat to our economy, and privatizes and eliminates their links to the government," according to McClatchy.

His running mate, Alaska Gov. Sarah Palin, spoke out from a rally in Colorado Springs. "Fannie Mae and Freddie Mac, they've gotten too big and too expensive to the taxpayers," Palin said. "The McCain-Palin administration will make them smaller and smarter and more effective for homeowners who need help."

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