Shares of Fannie Mae and Freddie Mac have come under pressure recently because of rising interest rates and concerns about price competition.

Fannie shares fell as much as 6% last week before rebounding Friday. Late Monday afternoon they were trading at $65.3125, up 0.50% from Friday's close but down 5.344% from a week before.

Freddie's stock was down 0.44%, to $56.125 late Monday afternoon but was still off 4.96% from the previous Monday's close.

Rising interest rates have clipped mortgage volume this year, and investors are worried that reduced volume will make it harder for the government-sponsored enterprises to feed their massive mortgage portfolios, which account for the majority of their revenues.

At the same time, a string of announced alliances between the enterprises and major lenders has made investors worry that in return for promised chunks of lenders' business, Fannie and Freddie are making price concessions on guarantee fees-the other big part of their business.

Freddie Mac lined up the two largest originators, Norwest Mortgage and Bank of America, to sell it the bulk of their loans. In exchange, Freddie will allow the two giants to use their proprietary automated underwriting systems rather than Freddie's system.

In retaliation, Fannie inked pacts with at least four other mortgage banks, including Fleet Mortgage Group and Dime Bancorp's North American Mortgage Co. All four of Fannie's confirmed partners use Fannie's automated underwriting system.

Jonathan E. Gray, analyst at Sanford C. Bernstein, said the new "instability" in secondary market share suggests that guarantee fees are, at the very least, unlikely to increase. "If anything, (guarantee fee pricing) will be under additional pressure," Mr. Gray said.

Mr. Gray estimated that guarantee fees on recent mortgage-backed securities issues have been 17 basis points or less, down from 19 earlier this year and 23 in 1997.

Thomas O'Donnell, analyst at Salomon Smith Barney said, all these concerns have hurt the stocks of Fannie and Freddie, despite Fannie's strong operating results for May, released last week. Fannie's portfolio grew 49.2% last month, and mortgage purchases totaled $25.6 billion, the second-highest monthly total on record.

The decline in Fannie's stock price presents a buying opportunity for "patient investors willing to ride out moderate volatility," Mr. O'Donnell said. Fannie's earnings "are far less susceptible than is the stock price to rising rates," he said, and a sustained price war between Fannie and Freddie is "not in the offing."

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