WASHINGTON — An analysis of Fannie Mae and Freddie Mac with President Bush’s budget proposal Monday showed that the administration is concerned that the government-sponsored mortgage companies may have trouble maintaining profit growth.

The Office of Management and Budget, which prepared the report, cited a number of factors that could contribute to slower profit growth at the GSEs. The report cited consolidation of mortgage originators, which gives large customers more bargaining power on fees; the fact that the share of all mortgages securitized by the GSEs is growing faster than mortgage lending in general, which could effectively cap their growth; and the possibility that investors already holding large amounts of their debt may be unwilling to let counterparty risk exposure to the GSEs climb much higher.

Fannie Mae spokesman Robert McCarson said his company is well-positioned to meet its earnings targets because the mortgage market is growing and Fannie has plenty of room to increase profits along with it. “Our share of revenues in 1999 was … 3.5%. To meet our EPS goals, our share of revenues would need to grow only to 4% by 2003,” he said.

The OMB analysis also appeared to make an argument for stronger regulatory oversight of the two enterprises, due to their increasing activity in the subprime mortgage market. The report said that as such loans begin to make up a larger share of the GSEs’ portfolios, “increasing attention must be paid to their practices for pricing and managing the associated risks.”

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