NEW YORK (CNN/Money) - The National Association of Home Builders warned that mortgage rates will rise if new legislation undermines the "implied guarantee" of Fannie Mae and Freddie Mac, according to a published report Monday.

The Bush administration has been pushing for legislation that would create a tough new regulator for the two mortgage companies. But Richard Syron, Freddie's chairman and CEO, argued at the association's convention in Orlando, Fla., that any legislation could hurt the housing market, the Wall Street Journal reported.

In defense of the mortgage companies, the industry group warned that mortgage rates will rise if investors lose confidence in the government backing of the two companies' $1.7 trillion in debt.

Investors' shared belief that the government would rescue Fannie Mae and Freddie Mac in a crisis helps them borrow money cheaply in the bond market, according to the paper.

The home builders suggested that the White House and Congress should focus more energy on increasing competition for Fannie Mae and Freddie Mac, the paper said.

More competition would "help keep Fannie and Freddie honest," Jerry Howard, chief executive of the association, told the Journal.