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.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV