By Hugh Son - Feb 24, 2012 5:38 AM GMT+0700
Bank of America Corp., the second- largest U.S. lender by assets, will stop selling new home loans to Fannie Mae after a dispute over faulty mortgages.
Starting this month, the Charlotte, North Carolina-based company will deliver only loan modifications and refinancings to U.S. government-controlled Fannie Mae, the bank said today in its annual filing with securities regulators.
Chief Executive Officer Brian T. Moynihan has been cutting expenses and jobs to revive profitability while fending off legal disputes tied to faulty home mortgages, with Fannie Mae among the biggest claimants. The bank’s 2008 acquisition of Countrywide Financial Corp., the largest home lender during the U.S. housing bubble, saddled Bank of America with responsibility for shoddy loans that contributed to about $42 billion in costs.
“This decision will not affect the credit available to our customers, and we will rely on other sources of liquidity to continue to ensure we are lending to our customers and supporting the housing-market recovery,” said Jerry Dubrowski, a spokesman for the bank, in an e-mailed statement. “We remain focused on supporting our customers with loan modifications and refinancing through the Making Home Affordable program.”
The bank will either sell new loans to Freddie Mac, the other U.S.-controlled mortgage finance firm, or retain them on its balance sheet, said a person with direct knowledge of the lender’s plans.
No Impact on Business
Dubrowski said the decision won’t have a material impact on its business. The bank has ended the past practices of Countrywide, “which had a significant relationship with Fannie Mae,” he said.
Andrew Wilson, a spokesman for Washington-based Fannie Mae, said the mortgage-finance company had no comment on the bank’s decision.
Concern about the mounting cost of faulty home lending weighed on Bank of America’s stock last year. After posting the worst performance in the Dow Jones Industrial Average for 2011, the firm is leading the 30-company benchmark this year with a gain of more than 40 percent.
To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net
To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net
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