Scott Simon, head of the mortgage-backed securities team at Pimco, has been called prescient for forecasting the housing meltdown. Now he’s predicting more pain ahead with 6 million to 7 million foreclosures over the next three years. Simon expects foreclosures will peak in the next two years, with the effects of the housing fallout expected to linger for years. In a Q&A posted on the global investment firm’s website, Simon also asserts there never was a housing recovery, and the market is now easier to break than fix. Pimco provided the questions, and the portfolio manager gave straightforward answers. “If policy makers alter the government’s current approach to housing and unwittingly break the market, they may not be able to repair the damage within the foreseeable future,” Simon said. He said analysts at the bond giant predict further declines in home prices of 6% to 8% from the already depressed levels. In one excerpt, Simon suggests too much home construction prior to the crisis led to unsustainable supply. “I used to live in South Orange County, and as I drove along Pacific Coast Highway to the office every day, I saw more and more new homes pop up each year,” Simon said. “I always wondered: Who is going to buy all these homes? Has job and population growth kept pace with the building? No. That means the stagnant qualified buyer pool has to deal with a few thousand extra houses and condos.” Excessive building prior to the crisis, based on Simon’s analysis, is just one of several barriers that will make the clean-up of the housing market much more difficult for Americans. Simon also addressed issues raised at servicing shops, but goes back to the basics, saying at some point a distressed asset is still collateral in a financial transaction that will have to be accounted for. “Issues with mortgage servicing appear to be at the heart of most cases reported in the media,” he said. “If the allegations in these lawsuits and reports are correct, then many servicers acted in their own best interest rather than in the best interest of either the lender or homeowner. But, frankly, loans were made against homes, and faulty paperwork is not going to allow anyone to own a home free of the debt. “Banks don’t lend a million dollars at a low interest rate on a credit card. They need collateral. So eventually we expect that someone will correct the paperwork or legitimately create new paperwork, and the foreclosure process will likely resume,” according to Simon. Simon’s full Q&A is available here. Write to: Kerri Panchuk.