Buffett Believes Wells Fargo Should Shoot For $1 Trillion In Mortgages

Billionaire investor and chairman of Berkshire Hathaway Inc., Warren Buffett, stated that Wells Fargo will receive a nice payoff as the housing market bounces back in the United States, due to their dominance in this particular marketplace.

“They’ve got a sensational mortgage operation,” Warren Buffett said while on the Bloomberg television program “In the Loop With Betty Liu”. This sound bite was part of an interview that Buffett gave during the Allen & Co. conference that took place in Sun Valley, Idaho.

He also stated that “The total mortgage market was at the $3 trillion level not that long ago. If it goes back up to $3 trillion, I hope Wells is doing a third of those.”

Wells Fargo, whose largest shareholder is Berkshire Hathaway, actually created one out of three mortgages in the first quarter of 2012. They also have plans to boost their market share by up to 40%. They even claim that the number of mortgage applications they’ve received has set a new quarterly high, and this is during the last three most recent months.

More borrowers are appearing because of the record low interest rates that are attracting them, and this is especially true for those individuals looking for refinancing. Wells Fargo has been capitalizing on this business because some of their major competitors, such as the Bank of America Corp., have been pulling back. Which is leaving the market wide open for them.

On average, a 30 year fixed rate mortgage has dropped to a relatively low 3.56% during the week which ends on July 12. This number is down over a half a percent since March, when the average interest rate was about 4.08%. This information is supplied according to Freddie Mac. The interest rate is actually the lowest the company has seen based on their records dating back to the year 1971.

The reason why Wells Fargo was able to capitalize on all of these mortgages being created right now is because they navigated the housing crisis quite successfully, according to Warren Buffett. They originated 33.9% of all home loans in the United States in the first quarter, which is more than triple the amount of one of their biggest competitors J.P. Morgan Chase and Company, who only originated 10.6% of those loans. This information is provided according to Inside Mortgage Finance, which is a trade publication.

Have Wells Fargo’s Rivals Faded?

“Wells did the best job of the big players in the mortgage market and therefore they’ve garnered a share as the other fellows have fallen by the wayside,” stated the 81-year-old Warren Buffett, whose investment firm Berkshire Hathaway owns over 7% of Wells Fargo’s common stock. This information was obtained through data provided by Bloomberg.

John Stumpf, 58-year-old CEO of Wells Fargo, picked up $208 billion in mortgage applications during the second quarter of 2012. They were able to successfully complete $131 billion in mortgage originations. The unclosed loans pipeline stood at $102 billion at the end of the month of June.

Warren Buffett has recently added onto his Wells Fargo investment, because he believes that there will be a housing market recovery and Wells Fargo will reap those rewards. He’s also recently bought a brickmaker, and with Leucadia National Corp., he also expanded the real estate brokerage of Berkshire Hathaway and has bet on more commercial property through this collaboration.

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