Four members of Washington’s powerful Senate Banking Committee have demanded that America’s newly state-owned mortgage companies freeze all foreclosure proceedings for the next three months as part of an attempt to stem losses in the US real estate market.

In a letter to Fannie Mae and Freddie Mac, which between them finance half of America's mortgages, Charles Schumer, of New York, Robert Menendez, of New Jersey, Sherrod Brown, of Ohio, and Robert Casey, of Pennsylvania have requested that the two companies halt all pending foreclosure proceedings on mortgages they hold for at least 90 days. They have argued that the freeze could help both home-owners and the companies. Such a request has been given added weight because Washington took control of Fannie Mae and Freddie Mac at the weekend.

The senators also asked the companies to revisit their policies and practices governing modifications involving mortgage-backed securities issued by the agencies. Their letter read: “As you are well aware, the housing crisis continues to devastate too many American families.”

They argued that such a freeze would also save the taxpayer money because foreclosed properties typically see a lender repaid only 30 cents of every dollar owed. They added that the Federal Deposit Insurance Corp (FDIC) found that a modified mortgage pays nearly 90 cents. They wrote: “Clearly, modifying at-risk mortgages maximises the value of these assets.”

Washington has already urged lenders to help to keep borrowers in their homes and to halt the foreclosure process by altering terms of mortgages. Henry Paulson, the US Treasury Secretary, announced at the weekend that federal authorities were taking over Fannie Mae and Freddie Mac, replacing their chief executive officers and eliminating dividends.

The companies can foreclose on loans they either own or guarantee, which is nearly half of the $12 trillion American residential mortgage market. Although they can direct servicers to stop foreclosure proceedings, other stakeholders, including private mortgage insurers, can intervene.

The FDIC took control of IndyMac on July 11 and is modifying troubled mortgages held by the California lender. The federal insurer said that it hoped to send out about 29,000 mortgage modification proposals. The modified loans will be available to most borrowers with a first mortgage either owned by, or securitised and serviced by, IndyMac, the FDIC said.

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