Wilbur Ross, the billionaire investor, is sticking to his guns.

He is still a fan of investing in mortgage servicing — despite the huge and painful unwinding of underwater mortgages to come.

Ross, CEO of WL Ross & Co, said investing in the mortgage servicing industry still remains more "attractive” than investing in the mortgages themselves, he told Bloomberg in an interview, although he didn’t discount buying mortgages in the future.

"It’s pretty safe lending,” he said.

He warned investors about the effect of mortgages on regional banks since many of them are "very residential mortgage-oriented.”

"I think we will see some failures,” he said.

Ross still dislikes the airline industry and has stayed away from investing in the sector.

He has trimmed his municipal bond portfolio, too, and remains bullish on municipal bonds. Ross believes they are a good investment because they are safe and demonstrate high quality.

The coupons on munis are still higher than Treasuries, making them an attractive investment, Ross said.

"Municipal bonds are probably a very good place to be,” he said. "They are very good quality. Most municipalities are pretty safe.”

Ross said munis could be a trend in the future, depending on the outcome of the presidential election and if taxes are increased.

The recent subprime debacle will not stop Gulf countries from investing in the U.S. or its financial sector, Ross said.

Investors from that region still see opportunities for investments since debt funding is becoming a greater issue.

Commodities are still high on Ross’ list of good opportunities, too. Much of the price increases in the market on commodities such as oil should be blamed on rumors and speculation, he said.

"I have to believe it’s more speculation and psychological than actual decline in supply,” he said.

Ross recommends buying steel, which he said has been "very good,” and cotton.

Hedging on commodities is important because of volatility. Cotton, for instance, is susceptible to weather issues, he said.

Investing in financial companies, however, can be "tricky,” Ross said, since they can "evaporate in no time” because most of them borrow short and lend long. This strategy makes them fragile, he said.

Volatility in the market will remain for "quite awhile”, Ross said. While it is easy to make the hedge funds the scapegoat, the economy and currencies are more to blame, he said. "Investors will have to get used to it,” Ross said.

He does not see an easy road ahead for the American consumer, who is "well tapped out.”

Consumers used to rely on their homes as their personal cash machines and borrowed more than they could afford. "There is a limit to how far you can go,” he said.

As a result, he doesn’t see the economy improving until later this year or next.

Investors, however, should not be surprised to see a credit crunch after years of easy times, Ross said. And the economy, he said, is faring much better than critics would have Americans believe.

"It’s not the Great Depression or Armageddon.” He said. "It shouldn’t surprise people there is the occasional rough year.”