Demographic trends are threatening to turn against the mortgage industry, meaning banks and thrifts will have to work harder to increase their business in coming years, Federal Reserve Chairman Alan Greenspan said Tuesday.

Addressing a conference hosted by America's Community Bankers, Mr. Greenspan pointed to expectations that new household formation, a key economic variable, has peaked. For mortgage lenders, which are already grappling with a shorter-term headache from a recent increase in interest rates, the longer-term shift carries deep implications for the industry and the U.S. economy.

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