A new compensation plan for housing-giants Fannie Mae and Freddie Mac announced on Friday by their government regulator will eliminate executive bonuses and target CEO pay at $500,000.

The top executives' pay at Fannie Mae and Freddie Mac will now stand nearly 75 percent below the levels existing before the government took the firms over in 2008, according to the Federal Housing Finance Agency. Both Fannie Mae and Freddie Mac are currently looking to appoint new successors to lead the mortgage finance companies because their current CEOs have previously announced their intended departures.

We've begun discussions with possible CEO candidates, FHFA Acting Director Edward DeMarco told reporters. They understand that we're seeking individuals at compensation more akin to government service than corporate employment.

Executive pay at Fannie Mae and Freddie Mac caused an uproar last fall on Capitol Hill as the companies continued to report huge losses and draw more than $150 billion in taxpayer aid to stay afloat. Republicans and Democrats in Congress have expressed chagrin that the companies, the two largest sources of mortgage finance, were paying out $12.79 million in bonuses for 10 executives.

The new pay plan updates an agreement put in place in 2009 that was done in consultation with the Treasury Department. The new compensation framework will also impact as many as 70 of the top executives at the two government-run firms whose bonuses will be eliminated.

The U.S. Senate has agreed on a resolution blocking executive bonuses at Fannie Mae and Freddie Mac. The resolutions is attached to a congressional insider-trading bill that is currently held up in a conference committee. Separately, a House panel voted in November to put the companies on federal pay scales, but the bill hasn't received a full floor vote.

The FHFA has defended the current pay packages as appropriate given the technical expertise needed to oversee two money-losing companies that guarantee half of all mortgages.

We tried very hard to be responsive to congressional concerns and to make appropriate adjustments, DeMarco said.

Before the announcement made today, Fannie and Freddie CEOs had annual base salaries of $900,000. They had the ability to make as much as $6 million each year after receiving deferred pay and bonuses.

(Reporting By Margaret Chadbourn; Editing by Theodore d'Afflisio)