The US government took control of mortgage giants Fannie Mae and Freddie Mac on Sunday, placing them in a government "conservatorship" to help avert a financial system meltdown from the housing crisis.

Treasury Secretary Henry Paulson announced a four-part plan that allows the US regulator to seize control of the government-chartered, shareholder-owned firms underpinning trillions of dollars of home loans.

The plan "is the best means of protecting our markets and the taxpayers from the systemic risk posed by the current financial condition" of the two government-sponsored enterprises, or GSEs.

"Because the GSEs are in conservatorship, they will no longer be managed with a strategy to maximize common shareholder returns, a strategy which historically encouraged risk-taking," Paulson said in a statement.

One key element in the plan enables the Treasury and Federal Housing Finance Agency to purchase a new class of preferred stock in the firms that "will ensure that each company maintains a positive net worth," Paulson said.

This will mean cash will be injected as needed, an action "more efficient than a one-time equity injection, because it will be used only as needed and on terms that Treasury has set."

The new plan does not eliminate the existing common and preferred shares but means they would absorb any losses ahead of the government, Paulson said.

"With this agreement, Treasury receives senior preferred equity shares and warrants that protect taxpayers," the Treasury chief said. "Additionally, under the terms of the agreement, common and preferred shareholders bear losses ahead of the new government senior preferred shares."