WASHINGTON - The CEO of Fannie Mae, the largest financer and guarantor of U.S. home loans, predicted Tuesday that the housing market downturn is likely to persist into 2010.

To blunt the broader economic impact, Fannie President and Chief Executive Officer Daniel Mudd, speaking at an event hosted by the U.S. Chamber of Commerce, urged lawmakers and lenders to pursue "the most generous means possible" to help borrowers facing sharply higher mortgage payments in the next few years. But Mudd voiced only qualified support for a plan orchestrated by the Bush administration that would help borrowers with weak credit whose mortgages are resetting to higher costs with a five-year freeze of interest rates.

Losses to investors from reworked loan contracts could reduce the available credit for mortgage securities and reverberate on Fannie and its smaller government-sponsored sibling, Freddie Mac, which buy home loans made by banks and other lenders and then bundle them as securities for sale to investors worldwide.

Washington-based Fannie Mae, which lost $1.4 billion in last year's volatile third quarter, expects to lose money this year on eight to 10 of every 1,000 mortgages held on its $2.4 trillion book - a steep increase from four to six in 2007.

Mudd's comments came the same day as Treasury Secretary Henry Paulson said the administration is exploring a possible expansion of the program to include stronger borrowers. Such an expanded plan to cover homeowners with conventional mortgages would more directly affect Fannie Mae and Freddie Mac, which have a relatively small exposure to high-priced subprime mortgages but stand behind hundreds of billions of dollars of conventional loans.

Shares of Fannie and Freddie slumped Tuesday as Countrywide Financial Corp., the nation's largest mortgage lender, released a statement denying rumors that it would soon file for bankruptcy.

Fannie Mae's stock fell $2.60, or 7.6 percent, to $31.63. Freddie Mac shares declined by $2.40, or 8.2 percent, to $26.76. Both Fannie and Freddie are major buyers of loans made by Countrywide.