Bank of America will stop selling new home loans to Fannie Mae after a dispute over faulty mortgages. Starting this month, the second-largest U.S. lender by assets will deliver only loan modifications and refinancings to Fannie Mae, the bank said Thursday in its annual filing with securities regulators.
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The bank has been fending off legal disputes tied to faulty home mortgages since the financial crisis. Fannie Mae has been among the biggest claimants. The bank’s 2008 acquisition of Countrywide Financial left it responsible for the lender’s shoddy loans, which cost Bank of America roughly $42 billion.
“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.”
Bank of America will now either sell new loans to Freddie Mac, or retain them on its balance sheet, according to a source with direct knowledge of the plans. Dubrowski said the decision won’t have a material impact on the business. Bank of America’s stock tanked last year on concerns over the mounting cost of faulty home lending, but after posting the worst performance on the Dow for 2011, Bank of America is now leading the 30-company benchmark this year with a 40 percent gain.
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