Standard & Poor's said this week that the total cost of retooling Fannie Mae and Freddie Mac may near $700 billion, but one analyst thinks investors need to scrutinize two core assumptions of the report. Jim Vogel, of FTN Financial, said the rate of losses and reserves Standard & Poor's calculates is one-and-a-half times the amount  the government-sponsored entities have incurred to date, which is "on a smaller base of outstanding loans from the 2005-08 vintages." "In effect, the S&P future loss estimate would represent approximately 180% of the rate of losses and reserves set aside in the last two years," Vogel said. The Federal Housing Finance Agency has held the GSEs in conservatorship since 2008. In October, the FHFA estimated the companies could cost between $221 billion and $363 billion through 2013. The ratings agency said the mortgage and housing industries can't "operate normally without continuing and substantial government involvement." The GSEs, which currently back more than 90% of all mortgages in the U.S., have already cost taxpayers $148 billion and could eventually cost up to $280 billion. But Standard & Poor's said that "could swell up to $685 billion" if the federal government decides to capitalize a new entity to replace Fannie and Freddie. Vogel said that possibility isn't getting any traction in Washington. "That critical core concept has no obvious sponsors among the White House, Treasury, Democrats, Republicans, the Federal Reserve, the mortgage industry, etc.," he said. "If the government remains in effective control of credit intermediaries through this decade, it is far more likely to do so with contingent capital rather than a direct investment." Write to Jason Philyaw.