CORRECTED - Fannie, Freddie to drop new mortgage insurance fees

(Corrects fifth paragraph to state that Fannie Mae and Freddie Mac were taken into conservatorship, not receivership)

By Patrick Rucker

WASHINGTON, Oct 3 (Reuters) - Fannie Mae (FNM.N) and Freddie Mac (FRE.N) have scrapped plans to raise mortgage insurance fees as the government-run companies try to keep borrowing costs low for homeowners.

The two companies had planned to collect a 0.25 percentage point surcharge on new home loans in an effort to increase revenue, boost cash reserves and generally protect themselves from mounting losses in the face of the worst housing downturn since the Great Depression.

In early September, the federal government seized Fannie Mae and Freddie Mac, saying the companies were so battered by the housing downturn that they could no longer fulfill their mission to aid home buyers.

The shareholder-owned companies had for many years struggled to fulfill their dual mission of delivering a healthy return for investors while satisfying Washington regulators that pushed them to make housing more affordable.

The companies' chief regulator, the Federal Housing Finance Agency, took Fannie Mae and Freddie Mac into conservatorship, all but wiped out shareholders and guaranteed the companies' debt in order to save them from collapse.

Now completely in government hands, the companies have taken steps to keep mortgage borrowing costs low. Their decision to scrap the surcharge is meant to "help stimulate the market," Freddie Mac said in a statement.

Eliminating the fee should help lower home borrowing costs for many prospective borrowers.

Since the takeover, interest rates have fallen on the home loans that may be underwritten by Fannie Mae and Freddie Mac as investors have been more willing to make loans to the companies with a now-explicit government guarantee. (Reporting by Patrick Rucker; editing by Dan Grebler)