Home prices fall - Fannie Mae reacts

It's widely acknowledged that housing is a key component of the economy. In fact, housing represents 15.2 percent of the U.S gross national product so worried glances must have been exchanged when a recent survey released earlier today revealed home prices in 20 U.S metropolitan areas fell in January by the most on record.

The private survey also indicates a 10.7 percent drop from January on the S&P/Case-Shiller index. The gauge has fallen for 13 consecutive months and a clear indication that the housing recession is deepening.

In other news, Fannie Mae, the largest provider of money for US home loans, tightened an exception to a policy reinstated last year to limit credit losses, potentially making it harder for consumers to refinance lower cost loans.

In a memo to lenders posted on its website on Monday, the government-chartered company will no longer allow homeowners to refinance loans it either owns or has packaged into bonds at loan-to-value ratios in areas with falling home prices if they're going to use proceeds to pay off a second mortgage.

Fannie Mae, which posted recorded $3.55 billion fourth-quarter loss, also this month said it would not allow cash-out refinancing among the mortgages larger than $417,000, that Congress this year temporarily allowed it and Freddie Mac to finance in certain areas.