The National Association of Business Economists are feeling similarly to the consumers polled by the Conference Board in May – that is optimistic. NABE released a survey today that states that its economists expect the recession to end soon, with a moderate recovery pace.

On the other hand, NABE’s economists expect a further decline in the economy in the second quarter, “making for the most severe economic contraction in over half a century.”

Key risks are large job losses, no improvement in credit conditions and further sharp declines in home values, reports NABE.

Still sounds like a lot of doom and gloom to me. And even when the recovery starts, it’ll be a while before the average American will notice it, I think.

Last week I spoke with a mortgage lender who told me even though the government requirements to make mortgage loans were favorable to consumers, such as a 620 credit score for an FHA loan, the investors who are buying loans on the secondary market have even stricter requirements. So that means, if a lender relies on money from the secondary mortgage market to make loans, that lender is not going to issue any loans that don’t meet requirements that investors seek. If you have a 620 credit score, but go to a lender who sells loans to an investor who wants a 640 credit score, you’re going to be out of luck. It’s an interesting paradox and made me realize how the market still plays a strong role, even with all the government stimulus activity.

May 27, 2009