Bank of America Cuts Pipeline to Fannie Mae
Bank of America, Corp will stop selling new mortgages to FanniernMae as the result of a dispute over the way Fannie Mae is handling repurchases.rn In November Bank of America said itrnwould not cooperate with a new Fannie Mae policy that would require it to takernback loans if an insurer dropped coverage. rn The Bank of America and therngovernment-controlled mortgage giant are in talks to resolve the disputernaccording to a Bloomberg source butrnthe Bank will cut off the loan supply this month. </p
Bank of America told its investors lastrnAugust that Fannie Mae’s policies on private mortgage insurance cancellationsrnor rejections might result in higher repurchase expenses for the Bank. The numbers of companies that write thisrninsurance have been dwindling. One ofrnthe largest insurers, PMI Corporation, was seized by Arizona regulators lastrnfall and their guidelines have been tightening. rnAccording to Bloomberg the insurers have been voiding policies forrnerrors including inflated appraisals or improperly documented borrower data. </p
Bank of America will continue tornsell its loans to Freddie Mac, the other government sponsored enterprise, andrnGinnie Mae and may keep, at least temporarily, some of the loans on its ownrnbalance sheet.</p
Bank of America has incurred what isrnestimated to be $42 million in expenses from loans it assumed when it took overrnthe failing Countrywide Mortgage Corporation in 2008. The fallout from thatrntake-over is continuing and the Bank of America is involved in many lawsuitsrnover Countrywide’s lending practices and the quality of loans those practicesrnproduced. It was among the lendersrnparticipating in a $25 billion settlement with federal agencies and 49 of thernstates’ attorneys general, and in a filing yesterday the Bank said it was “reasonablyrnpossible” that additional losses from litigation may reach $3.6 billion.</p
Bloomberg quotedrnDavid Felt, a former deputy general counsel at the Federal Housing FinancernAgency, the conservator of both Fannie Mae and Freddie Mac who said of Bank ofrnAmerican’s action, “I don’t know if Fannie really cares; it’s the largestrnmortgage purchaser in the world, and if Bank of America turns to Freddie Macrninstead, that’s like a different subsidiary of the same company.” </p
“This decision will not affect the creditrnavailable to our customers,” Jerry Dubrowski, a spokesman for the bank, said inrnan e-mailed statement. “We will rely on other sources of liquidity to continuernto ensure we are lending to our customers and supporting the housing-marketrnrecovery.”</p
Andrew Wilson, a spokesman forrnWashington-based Fannie Mae, said the company had no comment on the bank’srndecision.
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