The worst of the nation's housing debacle is yet to come, Jeffrey Gundlach, chief investment officer at Los Angeles-based mutual-fund company TCW Group Inc., told clients on a conference call yesterday. According to MarketWatch, which reported on Gundlach's remarks, the influential CIO told investors Wednesday that the current credit environment was "no market for old men" and stressed that housing's bottom was still not in sight. In particular, Gundlach singled out Citigroup Inc. (C) as the next "AIG-sized debacle," remarks sure to garner the attention of some investors. Citigroup posted a $2.5 billion Q2 loss amid $7.2 billion in credit costs and $7 billion in mortgage-led write downs. "I would give a very meaningful probability to the biggest, next AIG-size debacle being Citigroup," he was quoted as saying. During the second quarter, 90+ day delinquencies in first mortgages at Citi had jumped to 3.69 percent of loan volume — that’s roughly $5.4 billion in badly troubled first mortgages, a jump of 22.1 percent within one quarter, and well over double year-ago numbers. Among second liens, severe delinquencies increased from 1.45 percent in Q1 to 1.75 percent of loan volume, or $1.08 billion, by the end of the second quarter. That’s a total of almost $6.5 billion. "If it's like the Depression experience -- and it sure is shaping up that way -- it could take several years. Maybe we won't see a bottom in home prices until 2014," MarketWatch quoted Gundlach as saying. He also suggested that home prices may not return to normal until as far out as 2022, and forecast that the prime default rate could reach as high as 10 percent. The TCW investment chief was among the earliest to call the subprime mess, and his bearish remarks are certainly jarring, even despite the historic tumbling we've seen so far. Most analysts and economists agree that shoring up the nation's housing mess and associated price declines is the most critical component in regaining a foothold in financial markets that, as of late, have been nearly unhinged. Which means if Gundlach is correct -- that housing doesn't bottom for another 5 years or so -- investors had better buckle up for a very rough ride for some time to come. We'll note that Gundlach isn't alone. More than a few of our key sources in the investment community and in the default management/collateral risk business have told us privately in the past few months that they expect housing will take another 3 years or longer to find a true bottom. Which shouldn't surprise: most cataclysmic housing busts previous to this one have taken 4-6 years to run through the cycle and begin recovery. Sidenotes: Gundlach is certainly bearish: he predicted that the S&P 500 could fall below 800, more than 35 percent off from its already hard-hit Wednesday close. Disclosure: The author held no relevant positions when this story was published; indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.