State-owned
mortgage provider Fannie Mae is in talks with the No.2 bank in the United
States, Bank of America Corp (NYSE:BAC), to search for a solution to a dispute
involving bad mortgages, Reuters said quoting a source on the matter.
Between
204 and 2008 at the height of the U.S. housing boom, Bank of America and its
unit Countrywide Financial sold billions of dollars’ worth of mortgages to
Fannie Mae, which now wants to sell it back.
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The
bank has, of course, not been keen on taking back the loans that it sold.
Reuters said that the bank has in recent quarters said that the loans which
Fannie Mae was asking it to repurchase were as recent as two years back.
It
also said that the bank's contention was ta the loans had gone bad due to
adverse economic conditions rather than poor underwriting or lack of proper
documentation which are common causes for repurchase.
The
bank made a quarterly filing on Thursday where it said in relation to the
request that of its $10.1 billion in unresolved claims with Fannie, $7.3
billion related to loans in which the borrowers have been paying for more than
two years, Reuters reported.
The
dispute has soured relations between the two financial services institutions
with Fannie Mae not renewing a contract to buy home loans from the bank in
January, the report said.
Reuters
said that both the companies declined to comment on the news. In a quarterly
filing in May, the mortgager had said it continued to work with Bank of America
to resolve the issue but had not changed its estimates of the amounts it
ultimately expected to collect from the bank.
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Both
mortgagers Fannie Mae and Freddie Mac have been asking other banks too to buy
back more loans, but the problem is most acute for Bank of America, which got a
substantial chunk of toxic loans from Countrywide, which it purchased in 2008.
Shares
of BAC closed lower 0.55% to $7.18 on Thursday.
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