(Reuters) – A bipartisan group of U.S. senators will introduce a bill on Tuesday to abolish Fannie Mae and Freddie Mac and replace them with a government reinsurer of mortgage securities that would backstop private capital in a crisis.

The U.S. government seized the mortgage firms in 2008 to rescue them from insolvency, spending a total of $187.5 billion to keep them afloat. Fannie Mae and Freddie Mac, which charge lenders a fee in return for guaranteeing principal and interest on mortgages, are now posting record profits.

Under the latest discussion draft of the bill, which is being led by Tennessee Republican Bob Corker and Virginia Democrat Mark Warner, the two companies would be liquidated within five years and government reinsurance would kick in only once private creditors had shouldered large losses.

The system is designed to ensure a liquid mortgage market even in times of crisis, while protecting taxpayers from losses.

“It brings discipline back into the housing finance sector where you don’t have private gains and public losses,” Corker said on CNBC.

The measure seeks to jumpstart the stalled debate over how to remake the U.S. housing finance system.

Analysts cautioned, however, that the legislation was simply a first step and it faced an uphill battle in Congress. Any proposal that clears the Democrat-led Senate would have to win approval in the Republican-controlled House of Representatives, where some lawmakers want a fully private system.

Click here for the full story.