UPDATE 1-Democrat says abolish Freddie, Fannie-FOX

* Rep. Frank pondering how to replace Freddie, Fannie

* Frank says homeownership not for everyone

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WASHINGTON, Aug 17 (Reuters) - Fannie Mae and Freddie Mac should be abolished, Rep. Barney Frank, chairman of the House Financial Services panel, said on Tuesday.

"They should be abolished," Frank said in an interview on Fox Business, when asked whether the mortgage giants should be elements in housing market reform. "They only question is what do you put in their place," Frank said.

Frank said "not everybody should be a homeowner" and the federal government should not be a "backstop" in the mortgage crisis.

Frank commented after Treasury Secretary Timothy Geithner convened a Washington conference of housing industry leaders to hear ideas about reforms for the $10.7 trillion mortgage market.

Together, Frannie and Fredie and the Federal Housing Administration now back 90 percent of new U.S. home mortgages.

Fannie and Freddie -- recipients of $150 billion in taxpayer bailout money since being taken over by the Bush administration in 2008 to save them from collapse. (Reporting by Joanne Allen; editing by Sofina Mirza-Reid)