Citing a cooling housing market and higher interest rates, the Mortgage Bankers Association is forecasting that residential production will drop by almost 20% this year.The trade group says it expects residential funders of all stripes to originate $2.24 trillion in 2006, compared with $2.79 trillion last year. According to the Quarterly Data Report, a MortgageWire affiliate, mortgage bankers funded $3.02 trillion in 2005 (preliminary) and $2.87 trillion in 2004. Compared with the QDR figure for 2005, loan production could slip by 26% if the MBA's forecast proves true. MBA officials -- including MBA chairman Regina Lowrie -- acknowledged declining profit margins as a huge concern for the industry. "Investors are no longer paying premium prices for loans," Ms. Lowrie said at a press briefing. Despite the bad news for residential, the trade group says 2006 could be a good year for commercial mortgage bankers. "Capital continues to flow into the commercial and multifamily real estate markets on both the debt and equity sides," said MBA chief economist Doug Duncan. The MBA can be found online at http://www.mortgagebankers.org.

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