UPDATE 1-Lehman cuts price targets on Fannie Mae, Freddie Mac

(Adds details, share movement)

Oct 22 (Reuters) - Lehman Brothers lowered its price targets on Fannie Mae (FNM.N) and Freddie Mac (FRE.N) citing fear of rising credit costs and counterparty risk with the mortgage insurers causing "multiple compression."

The brokerage cut its price target on Fannie Mae to $67 from $80 and on Freddie Mac to $60 from $75.

Though credit losses at the two government-sponsored enterprises should be relatively low for the sector, the companies will not be immune to rising credit costs, which should limit earnings growth and multiple expansion, Lehman Brothers analyst Bruce Harting said in a note to clients.

Harting said though the new price target represents limited upside, he maintained his "overweight" rating on the stocks because GSEs are the best place to have money in a sector under extreme duress.

Shares of Fannie Mae fell 2 percent in early morning trade and were trading down $1.05 at $57.80, while Freedie Mac shares were trading down 27 cents at $52.78 in morning trade on the New York Stock Exchange. (Reporting by Avishek Mishra and Nachiket Kelkar in Bangalore)