WASHINGTON (Bloomberg) — US lawmakers will grapple with how to end the bailout of Fannie Mae and Freddie Mac after two years and almost $150 billion, and who pays the bill for bad loans made during the housing boom.

Regulators who seized control of the two mortgage lenders in 2008 are under pressure to stem losses for taxpayers and recoup money from banks that sold faulty loans to Fannie Mae and Freddie Mac — all without hindering the housing market's recovery. Assistant Treasury Secretary Michael Barr and Edward DeMarco, acting director of the Federal Housing Finance Agency, were scheduled to testify yesterday on their progress at the House Financial Services Committee.

The Obama administration and Congress are weighing the future of the two companies as part of an overhaul of the US housing finance system. Fannie Mae, based in Washington, and Freddie Mac, based in McLean, Virginia, lost $166 billion on guarantees of single-family mortgages from the end of 2007 through the second quarter, according to the FHFA. Treasury Secretary Timothy F. Geithner has promised a comprehensive proposal by early next year.

"The biggest problem in the economy is that we have three or four million too many homes," said Chris Kotowski, a banking analyst at Oppenheimer & Co. The solution "will take another two or three years to work out until we sop up the excess supply," Kotowski said.

The clean-up includes seeking refunds from lenders who sold loans based on false or misleading information, and the two government-backed firms aren't the only ones demanding buybacks. The Federal Reserve, private mortgage investors and mortgage insurers are combing through loan documents for faulty appraisals, inflated borrower incomes and missing documentation that would support a refund request.

As of the end of the second quarter 2010, Fannie Mae had $4.7 billion in outstanding repurchase requests, and Freddie Mac had $6.4 billion in outstanding repurchase requests. DeMarco said in his prepared testimony that outstanding repurchase requests continue to be "of concern".

The FHFA in July issued 64 subpoenas to firms that sold mortgage-backed securities to Fannie Mae and Freddie Mac, trying to determine whether misrepresentations or omissions might require issuers to repurchase the loans. Lawsuits tied to faulty mortgages were filed against lenders or underwriters by bond insurers such as MBIA Inc. and by at least three Federal Home Loan Banks, according to analysts.

Lenders are resisting some buyback demands, with Bank of America Corp., the biggest US lender and largest servicer of Fannie Mae's loans, calling negotiations a battle that it's fighting "loan-by-loan". Among those lodging claims, CEO Dominic Frederico at Assured Guaranty Ltd. said last month that the talks are "like Chinese water torture. They're very painful, have taken a long time."

Assured, based in Bermuda, has asked federal and state banking and insurance regulators to intervene in the disputes, he told analysts during a conference call.