Regulator mulls pay hikes for Fannie Mae and Freddie Mac CEOs

WASHINGTON, May 5 (Reuters) - The regulator of mortgage finance firms Fannie Mae and Freddie Mac could allow them to raise the pay of their chief executives in order to keep and attract talent at the government-controlled entities, company officials said on Tuesday.

Pay hikes at the top of the two firms are opposed by the U.S. Treasury on grounds that taxpayers continue to backstop the two firms after the government bailed them out in 2008 during the financial crisis.

But the Federal Housing Finance Agency, which operates independently of the Obama administration, believes current caps on pay limit the firms' ability to "develop reliable CEO succession plans," FHFA Director Mel Watt said in a statement.

Freddie Mac and Fannie Mae said they were told by the FHFA they could submit new proposals for executive pay at the firms.

Freddie Mac said in a filing to the Securities and Exchange Commission on Tuesday that the FHFA specified that the firm should not propose a pay increase that would put pay "higher than the 25th percentile of the market."

Egbert L.J. Perry, non-executive chairman of Fannie Mae's boards of directors, said the FHFA communication was "an important and necessary step" for retaining and attracting talented executives.

While FHFA has sole authority over executive compensation at Freddie Mac and Fannie Mae, the Obama administration made clear it wants to keep salary caps in place.

"(The) Treasury strongly recommends that FHFA continue its existing limits on CEO compensation," said Treasury spokesman Adam Hodge.

(Reporting by Jason Lange; editing by Andrew Hay)