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Freddie: Expect further declines in lending

New forecast a reversal from last month

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Economists at Freddie Mac are more pessimistic about the economy than they were a month ago, and no longer believe mortgage originations will rebound in 2009. In a forecast issued today, Freddie Mac's Office of the Chief Economist said total mortgage originations are expected to shrink by about 8 percent in 2009, to $1.65 trillion, before rebounding to $1.82 trillion in 2010. That compares with $3.26 trillion in purchase loans and refinancings originated in 2005. Just last month, Freddie Mac was projecting that mortgage originations would rebound to $1.92 trillion in 2009 and hit $2.04 trillion in 2010. Freddie Mac economists boosted their projections for continued growth in FHA- and VA-backed loans, however, saying they should reach $286 billion this year and peak at $340 billion in 2009, a more than four-fold increase from $80 billion in 2006. Freddie Mac's latest forecast includes new, lowered projections for economic growth, housing starts, sales and prices in 2009. Fre...