- The Washington Times - Wednesday, September 24, 2008

Nationwide home prices in July fell a record 5.3 percent compared with a year ago, a government agency said Tuesday, and have now receded to October 2005 levels.

Prices were down 0.6 percent from June on a seasonally adjusted basis, according to the Federal Housing Finance Agency.

The national decline in home values coupled with reckless lending standards during the real estate boom are the driving forces behind rising mortgage defaults and foreclosures. They have spurred a credit crisis that has shaken Wall Street to its core and caused the Bush administration to propose a $700 billion financial industry bailout.

The real estate industry expects more weak news Wednesday when the National Association of Realtors releases existing home sales for August.

The housing agency’s director, James Lockhart, suggested Tuesday that mortgage finance companies Fannie Mae and Freddie Mac could loosen lending standards to help more homebuyers qualify for a loan and stabilize the market. The government took control of Fannie and Freddie earlier this month.

“I expect any changes to reflect both safe and sound business strategy and attentiveness to the [companies’] mission,” Mr. Lockhart said Tuesday in testimony prepared for a Senate Banking Committee hearing. He also said that modifying loans for troubled borrowers should be a “high priority.”

Over the past year, the companies have tightened requirements and raised fees substantially, making it hard for borrowers with any blemish on their credit reports to qualify for a loan.

The national average rate on a 30-year, fixed-rate mortgage rose to 6.26 percent on Monday, up from 6.11 percent on Friday as details of the government’s rescue plan remained in flux, according to financial publisher HSH Associates. The rate had fallen as low as 5.87 percent on Sept. 16.

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