Wells Fargo Chairman Richard Kovacevich echoed recent bullish comments from Countrywide CEO Angelo Mozilo today, revealing that he too was optimistic about the future of the mortgage industry.
At a Bank of America conference in San Francisco, he commented on the current lending environment, noting that diversified companies like Wells Fargo would persevere, and recent turmoil would eventually subside.
“We have been waiting for war, pestilence and famine, and it looks like it has arrived,” Kovacevich said.
Though he acknowledged the negative state of affairs, he was quick to mention that prices on certain securities had improved, and that once the market normalized, mortgage lenders would be able to resume making home loans that most won’t touch at the moment.
“The nonconforming market will be back in no time at all,” Kovacevich said. “If you were worried that that’s going away, don’t worry. Trust me.”
What’s interesting is that Wells Fargo plans even further loan program cutbacks later this week to deal with the deteriorating mortgage market.
According to a source, the mortgage lender plans to cut “no ratio” and “no doc” loans from it’s product mix this Friday, as well as lowering the maximum loan amount from $6 million to $2 million.
Kovacevich did note that Wells Fargo didn’t deal much in exotic loans, and that the bank wasn’t dependent on Capital Markets to survive.
That has been the downfall of so many other smaller lenders who relied upon the secondary mortgage market to turn profits and pay back warehouse lines.
If you need more assurance about the future of Wells, take comfort in the fact that Warren Buffett is the lender’s largest investor.
Wells Fargo also announced that it has lowered the prime rate by half a percent, to 7.75%, effective today.
San Francisco based Wells Fargo is the second largest mortgage lender (behind Countrywide), and the fifth largest bank in the United States.