Fed up with erratic repurchase demand activity, Bank of America Corp. has decided not to sell new business to the Federal National Mortgage Association.
As of Dec. 31, 2011, BofA had $14.3 billion in unresolved repurchase claims, the Charlotte, N.C.-based company reported in a filing with the Securities and Exchange Commission. BofA has recorded repurchase liability of $15.9 billion.
BofA and Countrywide sold Fannie Mae and Freddie Mac a combined $1.1 trillion in mortgages originated between 2004 and 2008. Another $0.963 trillion in originations were sold to other investors.
The bank said that repurchase costs have skyrocketed as the government-sponsored enterprises’ repurchase requests, standards for rescission of repurchase requests and resolution processes have become increasingly inconsistent with their own past conduct and BofA’s interpretation of its contractual obligations.
“We are not able to predict changes in the behavior of the GSEs based on our past experiences,” the filing stated. “Therefore, it is not possible to reasonably estimate a possible loss or range of possible loss with respect to any such potential impact in excess of current accrued liabilities.”
BofA said that beginning this month, it would no longer deliver purchase-money mortgages to Fannie Mae. It will also withhold refinance transactions except for loans processed under the Home Affordable Refinance Program.
The move is being made because of the expiration and mutual non-renewal of certain contractual delivery commitments and variances that permit efficient delivery, BofA said. The continued delivery of loans to Fannie that don’t have contractual variances would require changes too costly to implement based on current operational issues.
“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,” BofA said. “We continue to deliver Making Home Affordable refinancing products into FNMA MBS pools, and continue to engage in dialogue to attempt to address these differences.”
Last year, Fannie had $653 billion in new business acquisitions.
BofA reported $156 billion in total originations during 2011.
