Jan. 19 (Bloomberg) -- Fannie Mae and Freddie Mac this month severed their three-year relationships to lobbyists linked to former House Majority Leader Tom DeLay, the Texas Republican indicted on money-laundering charges, the companies said.

The government-chartered mortgage finance companies cut ties to lobbyists at Alexander Strategy Group, including Tony Rudy, a former deputy to DeLay and the focus of a federal investigation of lobbyist Jack Abramoff, company spokesmen said.

Congress since 2003 has scrutinized the accounting and lobbying practices of Fannie Mae and Freddie Mac amid disclosures of more than $15 billion in bookkeeping mistakes. Lawmakers are weighing the creation of a tougher regulator for the two largest sources of money for U.S. home loans.

``The prudent course is to quickly distance themselves'' from all Alexander lobbyists, said Kent Cooper, co-founder of Washington-based PoliticalMoneyLine, which tracks lobbying and campaign donations.

Alexander, based in Washington, was founded by Edwin Buckham, a former chief of staff to DeLay. Neither Buckham nor Rudy returned phone calls requesting comment.

Playing it `Tight'

Fannie Mae and Freddie Mac ``will both be playing it very tight in terms of any new contracts with lobbying firms, and in terms of due diligence on who these firms are,'' said Cooper, a former Federal Election Commission official.

Congress created Washington-based Fannie Mae and Mclean, Virginia-based Freddie Mac to expand financing available for homeownership. The companies either own or guarantee almost half of the $7.6 trillion mortgage market.

Fannie Mae shares fell 31 percent last year, while Freddie Mac declined 11 percent. Fannie Mae shares gained 1.6 percent to $54.10 today on the New York Stock Exchange. Freddie Mac shares rose 0.5 percent to $67.56.

As House majority leader, DeLay helped determine the content and timing of legislation creating a regulator with power to alter capital standards, bar new lines of business and shut down Fannie Mae and Freddie Mac in the event of default. Although the House approved such a bill in October, similar legislation has yet to go to the Senate floor for a vote.

DeLay said on Jan. 7 that he would abandon his drive to return to the post of the No. 2 House Republican. He stepped aside as majority leader in September after serving in the position since 2002.

Alexander, which plans to disband this month, employed Jim Ellis, the head of Americans for a Republican Majority, DeLay's political action committee. Like DeLay, Ellis faces money- laundering charges in Texas.

`Completed' Contract

Alexander from 1998 until 2002 employed DeLay's wife, Christine, paying her from $3,200 to $3,400 a month, said Richard Cullen, a lawyer for the former majority leader. The firm currently employs as a lobbyist Karl Gallant, who preceded Ellis as leader of DeLay's political action committee.

Fannie Mae's contract with Alexander ``is completed and we don't intend to utilize any member of the former firm's services this year,'' spokesman Brian Faith said. The company last week sent a letter to Alexander ``formally terminating the relationship effective'' on Jan. 30, Faith said.

While at Alexander, Rudy worked as a lobbyist for Fannie Mae beginning in 2002, according to federal filings by Alexander.

Freddie Mac ``had an exclusive relationship with Terry Haines at Alexander Strategy and it's premature to discuss what future relationship we'll have'' with him, spokesman Doug Duvall said. Haines is a former staff director for the House Financial Services Committee that oversees the regulator for Fannie Mae and Freddie Mac. The company doesn't have a business relationship with Alexander, Duvall said.

`Staffer A'

A federal filing by Alexander dated July 25, 2005, lists Haines, Rudy, Buckham, Gallant and eight other employees at the firm as individuals ``who acted as a lobbyist'' for Freddie Mac. Alexander in a similar filing dated March 1, 2003, listed Buckham, Haines and Rudy as lobbyists for Freddie Mac. That year the company paid Alexander $340,000, according to PoliticalMoneyLine.

A plea agreement filed by Abramoff on Jan. 3 states that in 2000 a DeLay aide the government called ``Staffer A'' helped the lobbyist defeat legislation that would have restricted Internet gambling. People familiar with the case later said the staffer was Rudy, DeLay's former deputy staff chief.

In return, the wife of ``Staffer A'' was paid $50,000 through a charity, according to the plea. Rudy hasn't been charged with a crime.

2005 Payments

Alexander during the first half of 2005 received $120,000 from both Freddie Mac and Fannie Mae, according to the firm's federal filings. It has lobbied for Freddie Mac since 2003, when Treasury Secretary John Snow called on Congress to create a stronger regulator for the two publicly traded companies.

Freddie Mac increased lobbying spending during the first half of last year by 8 percent to $7.26 million, according to PoliticalMoneyLine. The outlay was second only to that of General Electric Co., which spent $13.9 million.

``Given our well funded opposition, we think we have an appropriate level of lobbying resources dedicated to preserving our role in America's housing finance system,'' Duvall said.

Fannie Mae spent $4.88 million on lobbying during the first half of 2005, or 2.2 percent less than the $4.99 million spent during the same period in 2004, according to PoliticalMoneyLine. The company said last year it planned to cut total lobbying costs by a third.

Fannie Mae and Freddie Mac will fully vet their lobbyists following a guilty plea this month by Abramoff to conspiracy to corrupt public officials, PoliticalMoneyLine's Cooper said. Abramoff and his partners charged Indian tribe clients fees exceeding $80 million while offering lawmakers enticements such as overseas trips.

``It's the fear of the unknown,'' Cooper said. Fannie Mae, Freddie Mac and other corporate ``clients are going through their records asking, `What did we ask our lobbyists to do and who did they have contact with?' just to try and get ahead of it a bit.''

To contact the reporter on this story: James Tyson in Washington at at jtyson@bloomberg.net