Fannie Mae (FNM) and Freddie Mac (FRE) remain vulnerable to mounting home mortgage delinquencies as well as the troubled multifamily market, the companies' regulator will testify at a U.S. Senate hearing Thursday.

"While a few positive signs of recovery in housing have begun to emerge, we remain concerned and recognize the risk associated with increasing numbers of seriously delinquent loans," Federal Housing Finance Agency Acting Director Edward J. DeMarco will tell the Senate Banking Committee in prepared remarks.

Government-sponsored enterprises Fannie and Freddie have racked up a combined $165 billion in losses over the past eight quarters, due to soaring mortgage defaults. The rate of seriously delinquent mortgages at Fannie and Freddie is 4.2% and 3.1%, respectively, according to DeMarco's testimony.

"These rates are disturbing both in their magnitude and the fact that they continue to increase," he will say.

Meanwhile, Fannie's and Freddie's combined share of the multifamily or apartment market has swelled, jumping to 84% last year from 34% in 2006, according to the testimony. The multifamily sector is experiencing the highest vacancy rates since records began in the 1950s.

The companies also remain vulnerable to losing senior staff as the economy recovers, DeMarco will say. In the past year, Fannie and Freddie have both undergone turnover at the top, and several key positions below the executive levels remain vacant.

"As we see improvements in the economy, opportunities for employees and officers to seek other employment will increase, adding to the current retention challenge," DeMarco will testify.

The hearing is one of the first signs that lawmakers are turning their attention to Fannie and Freddie, which were seized by the government over a year ago amid soaring mortgage defaults.

In its plan to revamp financial industry regulation, the Obama administration was silent on the issue of the government's role in the housing market. It says it will unveil a proposal to restructure Fannie and Freddie when it releases its 2011 budget in February.

Since Fannie and Freddie were thrown into the conservatorship of their regulator, they have been ordered to take on various initiatives to prop up the housing market. Treasury has also pumped $96 billion into the companies to keep them solvent under agreements that give Treasury a preferred stake in the firms.

Treasury's agreements and the many initiatives the companies have undertaken since they were put into conservatorship "could increase the costs and challenges of associated with transitioning to new structures," William B. Shear, Government Accountability Office Director of Financial Markets and Community Investment, will say in prepared remarks.

"Although it is not possible to predict what effects federal initiatives to respond to the housing crisis and the Treasury agreements with the enterprises could have on any transition, they could be substantial," Shear will say.

The GAO recently issued a report on options for restructuring Fannie and Freddie and, in his testimony, Shear reiterates many of the report's conclusions. The companies' mixed record on achieving their housing mission and their recent near collapse last fall reinforces "the need for Congress and the executive branch to fundamentally reevaluate the enterprises' roles, structures, and business activities in mortgage finance," he will argue.

-By Jessica Holzer, Dow Jones Newswires; 202-862-9228; jessica.holzer@dowjones.com