Shares in Bear Stearns, Fannie Mae, Freddie Mac and other leading housing financiers plunged on Monday amid widening concerns about the health of the US mortgage market.

Fannie fell 13 per cent, Freddie 11.5 per cent and Bear 11.1 per cent as housing concerns helped send the broader market lower. The S&P 500 lost 20 points – or 1.55 per cent – to 1273.37, its lowest level in more than 18 months

“If liquidity is the elixir of life for any Wall Street firm, the current market certainly has the potential to be lethal,’’ said Kenneth Hackel, managing director of fixed-income strategy at RBS Greenwich Capital Markets, in a note to clients.

Bear shares were down as much as 14 per cent during a day in which the investment bank – a big underwriter of mortgage-backed securities – publicly confronted rumours that it could be facing a liquidity crisis.

Such rumours have circulated since Bear ran into trouble in the summer.

Ace Greenberg, chairman of Bear’s executive committee, dismissed speculation as “totally ridiculous”.

Fears about Fannie and Freddie were sparked by a report in the magazine Barron’s that suggested Fannie’s leverage left it with “little room for error” and speculated that a government bail-out might be necessary. Credit Suisse slashed its share price target for Freddie amid concerns that the company might have to take up to a $5bn writedown on its subprime mortgage bonds.

Fannie and Freddie have posted huge losses as falling home prices and rising foreclosures have increased credit costs, while credit market volatility has led to losses on their derivative port­folios.

Countrywide shares tumbled 14 per cent amid concerns that an investigation by the Federal Bureau of Investigation into possible securities fraud might derail Bank of America’s take-over of the lender.

Freddie reported a record loss of $2.5bn for the fourth quarter of 2007, while Fannie posted a $3.6bn fourth-quarter loss.

The companies’ regulator – the Office of Federal Housing Enterprise Oversight – last month gave Fannie and Freddie the green light to expand their mortgage portfolios by removing caps put in place after past accounting scandals.