The Mortgage Bankers Association predicted that the nation’s mortgage business won’t halt its current slide anytime soon with mortgage originations expected to fall 18 percent next year and decline another 6 percent in 2009, the Associated Press reported today. 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. 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.

A dozen organizations representing the financial services industry wrote to the Senate Judiciary Committee on Tuesday, expressing concern about coming legislation that would permit lienstripping of residential home mortgages in chapter 13. “We are very concerned about legislative proposals intended to respond to problems in the subprime market by making major changes to our bankruptcy system.” The concern of the organization centers on proposals, such as those put forward by the Center for Responsible Lending, to allow bankruptcy judges to modify the terms of a mortgage in a chapter 13 proceeding that could involve reducing the value of the loan, extending the terms of the loan, lowering the interest rate and delaying the effective date of an adjustable rate increase. “If a mortgage loan can be modified or rendered unsecure during bankruptcy, it will be far more difficult to originate or sell mortgages in the secondary market,” the organizations said. “Such changes introduce substantial risks that the terms of loans will be changed in unpredictable ways. The costs of mortgages would have to increase to reflect this additional risk. These proposals would reduce liquidity and make it harder for Americans to obtain a new mortgage or refinance their existing mortgage, the exact opposite of what the mortgage market needs now.”