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 "It will come back," Doug Duncan said in an interview in which he described a shift to far stricter lending standards for people with spotty credit. The gloomy mortgage outlook is driven by the shrinking flow of cash to lenders from increasingly risk-averse investors, as well as slower overall economic growth.
"We have not yet seen fully the impact of the credit shock to the U.S. and world economies, and the severity of that impact will depend on how long it takes for the markets to return to normal functioning and where credit spreads ultimately settle," Duncan told reporters in a preview of his Wednesday convention speech.
Total mortgages written are expected to decline nearly 15 percent this year to $2.31 trillion from $2.73 trillion last year. Originations are expected to fall at a slightly steeper 18 percent next year, then begin to decline at a slower 6 percent rate in 2009.
The erosion is expected to ease as a projected 5 percent rise in mortgages for people buying homes in 2009 partially offsets an expected 18 percent drop-off that year in mortgages for homeowners who refinance.
The 2009 increase in originations is based on the MBA's expectations that home sales and prices will begin picking up that year.
The MBA expects sales to hit bottom in the third quarter of next year, after existing home sales decline a projected 12 percent this year to 5.72 million units sold. Existing home sales are expected to decline a further 10 percent next year before growing by 5 percent in 2009.
The MBA forecasts a 2 percent home price decline both this year and next year, with prices flattening out in 2009.
With the current glut of homes for sale, "any significant increase in homebuilding is probably years off," Duncan said.
The MBA's forecast comes after Treasury Secretary Henry Paulson said in a speech Tuesday that the housing market correction is persisting longer than expected and appears likely to "continue to adversely impact our economy, our capital markets and many homeowners for some time yet."
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 The housing downturn has been most severe in the so-called "subprime" market, where mortgages are held by borrowers with spotty credit or low incomes.
Despite spiking foreclosures and bankruptcy filings by several subprime lenders, mortgage bankers aren't giving up on the industry, which has been an important factor boosting U.S. home ownership over the past decade.
Duncan said the subprime niche won't dry up entirely. But he said subprime borrowers will have to make sizable down payments before securing a mortgage loan and must offer documentation of their incomes, employment histories and credit standing.
"The day of the 100 percent loan-to-home value loan in the subprime world are gone," he said in an interview with The Associated Press.
"If you've got a spotty employment record, but good financials on your credit record, you may well still be able to get credit," he said. "But if you have a spotty employment record, and late payments on three credit cards, and you don't have cash reserves, most likely you're not going to get the credit.
"Layered risks is what that is all about," he said.
[Associated Press; by Mark Jewell]
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