Buffett Says Wells Fargo Should Aim for $1 Trillion in Mortgages

Berkshire Hathaway Chairman Warren Buffett
Warren Buffett, chairman of Berkshire Hathaway Inc. Photographer: David Paul Morris/Bloomberg

Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc., said Wells Fargo & Co.’s dominance of U.S. home lending will pay off as the housing market rebounds.

“They’ve got a sensational mortgage operation,” Buffett said today on Bloomberg Television’s “In the Loop With Betty Liu” program in an interview from the Allen & Co. media conference in Sun Valley, Idaho. “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, which counts Berkshire Hathaway as its largest shareholder, created one of every three U.S. mortgages in the first quarter and may seek to boost market share to 40 percent. The company said today that the number of applications set a new quarterly high during the most recent three months.

Record-low interest rates have helped mortgage lenders attract more borrowers, especially for refinancing, and the San Francisco-based bank has added business as competitors such as Bank of America Corp. pull back.

The average for a 30-year fixed-rate mortgage fell to 3.56 percent in the week ended July 12 from 4.08 percent in March, according to Freddie Mac. It’s the lowest in the McLean, Virginia-based mortgage-finance company’s records dating to 1971.

Wells Fargo is getting more business because the firm successfully navigated the housing crisis, Buffett said. The bank originated 33.9 percent of all U.S. home loans in the first quarter, more than triple that of JPMorgan Chase & Co., with 10.6 percent, according to Inside Mortgage Finance, a trade publication.

Rivals Fade

“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,” said Buffett, 81, whose firm holds more than 7 percent of the common stock, according to data compiled by Bloomberg.

Wells Fargo, run by CEO John Stumpf, 58, received $208 billion in mortgage applications in the second quarter and completed $131 billion in originations. The pipeline of unclosed loans stood at $102 billion at the end of June.

Buffett, who has added to his Wells Fargo investment, is betting on a housing-market recovery. He’s bought a brickmaker, expanded Berkshire’s real-estate brokerage and wagered on commercial property through a company jointly owned with Leucadia National Corp.

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