U.S. home prices fell 5.5 percent in July compared with the same month a year ago and are about equal to where they were in Oct. 2005, according to the Federal Housing Finance Agency.

Prices were down 0.6 percent from June on a seasonally adjusted basis, according to the agency.

James Lockhart, director of the agency, urged Fannie Mae and Freddie Mac to loosen lending standards to encourage more sales.

“I expect any changes to reflect both safe and sound business strategy and attentiveness to the (companies’) mission,” 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.”

But some observers think availability of mortgages is only part of the problem. “The crash of other financial assets has made folks rather uncomfortable,” said Keith Gumbinger, a senior vice president with HSH Associates financial publisher. “It’s not about keeping Fannie and Freddie afloat any more.”

Source: The Associated Press, Alan Zibel (09/23