WASHINGTON -- The dominance of Fannie Mae and Freddie Mac in the fixed-rate mortgage market "raises some public policy concerns that this market may not be fully competitive," the Congressional Budget Office said Monday.

The office also said the two government-sponsored enterprises "could be capturing some of the benefits of their GSE status for their shareholders instead of delivering most of those benefits to mortgage borrowers."

The CBO said that during the past five years Fannie Mae, the Federal National Mortgage Association, had a 29% rate of return on equity and that Freddie Mac, the Federal Home Loan Mortgage Corp., had a 23% rate of return on equity.

"In the early 1980s, these two GSEs securitized about 20% of all newly originated conventional conforming mortgages for one- to four-family residences; by 1989, they securitized roughly 70% of the market," the CBO said.

Citing a 1992 Federal Reserve study, the CBO report said: "Some empirical evidence suggests that the GSEs may not have priced their services at fully competitive levels in the 1980s. Certainly, the firms have been able to provide high returns to their shareholders."

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