Bank exec predicts mortgage rebound

Wells Fargo & Co. Chairman Richard Kovacevich said Wednesday that the U.S. mortgage industry would recover after further short-term pain, with the rebound led by better-diversified lenders less exposed to market vagaries.

The current market turmoil may have a “way to go,” Kovacevich said at an industry conference in San Francisco.

But prices on many securities have improved, he said, and once the market settles down, mortgage lenders will resume making home loans that many investors currently won’t buy.

San Francisco-based Wells Fargo, the nation’s fifth-largest bank and second-largest mortgage lender, has largely escaped troubles afflicting rivals such as the largest U.S. mortgage lender, Countrywide Financial Corp.

Wells Fargo is not overdependent on capital markets for funding, and made few of the exotic loans that have led to rising defaults and spooked investors.

In California, a focal point for investors because of elevated home prices, the environment is “pretty ugly at the moment” but will right itself, Kovacevich said.

“Silicon Valley is actually booming. Los Angeles is extremely diversified,” he said. “It’s just so difficult to build houses, find land and so on, that you don’t have a huge overhang. . . . If you’ve got development rights and property in this state, you’re going to be just fine. Over time.”