Fannie Mae (FNM) and Freddie Mac (FRE) are unlikely to repay the government in full for all the capital pumped into the companies, their regulator said Thursday.

"My view is that some assets in the senior preferred will have to be left behind as they come out of conservatorship," Federal Housing Finance Agency Director James B. Lockhart said at a panel discussion in Washington. "That will mean that some of the losses will never be repaid."

The Treasury has agreed to pump $400 billion combined into the companies in order to keep them solvent. In exchange, it receives senior preferred stock. So far it has injected $85 billion, but Lockhart said that figure was likely to increase in the coming months.

Fannie and Freddie together own or guarantee $5.4 trillion in mortgages. When the housing market soured in 2007, defaults ate through their thin cushion of capital, prompting fears they would collapse. The government seized them in September.

Lockhart said the companies could return to strong profits in two to three years. But he cautioned that their thin capital and huge exposure to the mortgage market make it unlikely they will be able to repay the government in full.

"The book is so large that it is hard to see that they could actually repay all that," he said.

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