After growing steadily in late 2005 and early this year, the retained portfolios of Fannie Mae and Freddie Mac have been gradually eroded by tough competition from other investors and a slowing supply of new MBS coming to market. Fannie Mae reported $726.8 billion in its mortgage portfolio as of the end of August, down about $700 million for the year and off $7.0 billion from May, its highest level since the government-sponsored enterprise was forced to pare assets to shore up its capital position...