Credit markets not expected to recover this year

LAS VEGAS (Reuters) - Wall Street's biggest mortgage investors and bankers aren't betting on a recovery in U.S. credit markets any time soon.

Instead, they're searching for ways to restore investor confidence in the so-called securitization market, which has emerged as the epicenter of the U.S. subprime mortgage crisis, while bracing for further hits in commercial mortgages and credit-cards, according to experts gathered on Monday at the American Securitization Forum's (ASF) meeting in Las Vegas.

Roughly 50 percent of ASF professionals recently polled by the group -- whose members helped fuel the U.S. housing-finance industry's boom and bust -- don't believe that current credit market troubles will dissipate in 2008.

"People are dour right now," John Devaney, chief executive and trader at United Capital Markets, said in an interview with Reuters at the conference.

"All the innovation over the past 10 years has really helped out the consumer, but inside our industry there's very big sweeping changes that'll take years to heal," he said.

Specifically, changes in how information about risk is provided to investors are needed before the world of securitization -- where mortgages, credit card payments and other types of debt are repackaged into securities -- can return to health, industry experts say.

Devaney, whose net worth has been cut in half by the U.S. subprime crisis, said most investors are too burned by previous mortgage bets to take advantage of new opportunities.

"There are a lot of guys who won't buy triple-A any more," Devaney said, referring to the highest credit rating provided by rating agencies and the market's loss of confidence in those agencies. "New outside guys that haven't been involved need to come in."

To be sure, some market participants believe securitizations involving auto loans and credit cards have been unfairly hit by the crisis and are likely to recover faster.

That's the view of Frank Byrne, managing director of Deutsche Bank, who told Reuters: "They'll be back in business."

But Scott Austin, structured products trader at Metropolitan West Asset Management, warned conference participants during a panel about looming problems in commercial mortgage-backed securities, while Devaney is worried about whole loan securitizations.

And no one seems to have a clue when so-called collateralized debt obligations, or investments that pool together mortgage securities, will find favor again.

"Everyone knows (the market) sucks, but it has been that way for so long we are used to it now," said one collateralized debt obligation trader at the conference.

(Editing by Leslie Adler)