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NEW YORK (
Fannie Mae(FNMA.OB) claims it decided to terminate its contract with
Bank of America(BAC - Get Report) and not the other way around.
In a statement announcing its results, the housing finance giant said it decided to cut off Bank of America from selling most types of loans at the end of January after the bank failed to honor its repurchase requests in a timely manner.
Fannie said that Bank of America, which accounted for 52% of Fannie's outstanding repurchase requests as of December 2011, measured by unpaid principal balance, slowed the pace of its repurchases. As a result, Bank of America's delays, the bank accounted for 59% of repurchase requests outstanding for more than 120 days, up from 28% in the third quarter of 2011 and 37% in the year-ago quarter.
"Fannie Mae is taking steps to address Bank of America's delays in honoring Fannie Mae's repurchase requests. For example, Fannie Mae did not renew its existing loan delivery contract with Bank of America at the end of January, which significantly restricted the types of loans they can deliver to Fannie Mae," the GSE said in its statement.
It went on to add that it has not changed its estimates of how much it expects to ultimately collect from Bank of America and continues to work with the bank on these issues.
If it collects less than estimated from Bank of America, Fannie Mae may have to seek additional funds from the Treasury.
That would be in addition to the $4.571 billion the mortgage finance giant just requested, to bridge its networth deficit, after it posted a fourth quarter loss of $2.4 billion and a 2011 loss of $16.9 billion.
Further, Fannie said that the change in contract will not have a material impact on its results or operations as Bank of America represented less than 5% of Fannie Mae's loan delivery volume in the fourth quarter.
Bank of America said in its annual report that it will no longer sell loans to Fannie Mae , citing its differences over repurchase claims. "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."
While the overall statement indicated that the termination was mutual, most industry observers had interpreted the bank's move as an aggressive step in its battle with the GSEs over repurchase claims.