Bank of America Drops a Bomb: No More Sales to Fannie


Bank of America Thursday afternoon confirmed that it will no longer sell any new purchase money mortgages to Fannie Mae — though it will remain a HARP lender.

A bank spokesman told National Mortgage News that B of A “has a number of options” concerning residential liquidity including putting loans on its balance sheet and issuing securities backed by the Government National Mortgage Association.

It also will sell more of its production to Freddie Mac, Fannie’s only competitor in the secondary market, he said. (Operating under federal conservatorships both GSEs are controlled by the Treasury Department and their regulator, the Federal Housing Finance Agency.)

In a new SEC filing, B of A said, “Beginning in February 2012, we are no longer delivering purchase money and non-Making Home Affordable Program (MHA) refinance first-lien residential mortgage products into FNMA mortgage-backed securities (MBS) pools” because of disputes the bank is having with the GSE over loan buybacks.

In the filing B of A estimates it is on the hook for $14.3 billion of repurchase claims from “all sources” including the GSEs.

At press time a spokesman for Fannie Mae declined to comment.

Last fall rumors began to surface that Fannie would no longer purchase any new loans from B of A because of disputes over both buybacks, and what the GSE felt was insufficient underwriting oversight.

In the SEC filing the bank adds: “While we continue to have a valid agreement with FNMA permitting the delivery of purchase money and non-MHA refinance first-lien residential mortgage products without such contractual delivery commitments and variances, the delivery of such products without such contractual variances would involve time and expense to implement the necessary operational and systems changes and otherwise present practical operational issues.”

It adds: “The non-renewal of these contractual delivery commitments and variances was influenced, in part, by our ongoing differences with FNMA in other contexts, including repurchase claims. We continue to deliver MHA refinancing products into FNMA MBS pools, and continue to engage in dialogue to attempt to address these differences.”

Early last decade Countrywide Financial Corp., which B of A bought four years ago, signed a “strategic alliance” deal with Fannie whereby it sold almost 90% of its conventional originations to the GSE.

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