Fannie Mae FNMA.OB did not renew a contract to buy most home loans from Bank of America Corp (BAC.N) because the bank is resisting demands to repurchase delinquent mortgages, the company said in a U.S. regulatory filing on Wednesday.
The U.S. government-controlled buyer of mortgages said it had made the decision at the end of January after Bank of America slowed the pace of its repurchases of soured home loans sold to Fannie during the housing boom.
Bank of America disclosed in a regulatory filing last week that it had stopped selling home-purchase loans and certain refinanced mortgages to Fannie, citing differences over repurchase requests. The bank had said the move came after the "expiration and mutual nonrenewal of certain contractual delivery commitments."
The dispute highlights the tension between lenders and investors who bought mortgages from them during the housing boom. As delinquencies on these loans have increased, investors want banks to buy them back under contractual agreements, spurring losses for the banks.
This is a particularly expensive issue for Bank of America, which bought subprime lender Countrywide Financial in 2008.
In its 10-K filing with the U.S. Securities and Exchange Commission, Fannie Mae said Bank of America had the highest volume of outstanding repurchase requests among the lenders it works with based on unpaid principal balances, accounting for 52 percent of the total at the end of December.
In these repurchase requests, Fannie Mae is contending that loans went bad because of certain contractual breaches, including poor underwriting or defective documentation. Bank of America, however, has pushed back, saying many borrowers have made payments on the loans for more than two years and that lost jobs and other economic issues contributed to the delinquencies.
Bank of America has said that of the $32 billion in repurchase requests it has received from Fannie and Freddie Mac FMCC.OB, the other government-controlled mortgage buyer, about $26 billion has been resolved in some fashion.
Fannie said in the filing that it had not changed its estimate of the amount it expects to ultimately collect from Bank of America and continued to work with the lender to resolve their issues. However, if Fannie collects less than the amount it expects, "we may be required to seek additional funds from Treasury under our senior preferred stock purchase agreement," the company said in the filing.
Bank of America continues to sell some refinanced loans to Fannie. The bank also still sells loans to Freddie Mac and can hold loans in its own portfolio.
Bank of America spokesman Jerry Dubrowski declined to comment on the Fannie filing.
(Reporting by Rick Rothacker in Charlotte, N.C.; Editing by Lisa Von Ahn)