Sunday, February 26, 2012

BofA mortgage move not likely to have big consumer impact

Bank of America Corp appears to be going it alone in not selling mortgage loans to Fannie Mae, a move that, while sending an angry signal to the nation's largest mortgage-buyer, could force the bank to charge less attractive mortgage rates.

Some major competitors indicated on Friday they are not following Bank of America's decision to stop selling most of its new loans to the government-controlled buyer of home loans.

Bank of America's decision, which follows years of legal wrangling with Fannie , could drive up the bank's own mortgage costs because it would have one less bidder for its loans.

"It could make them a little less competitive," said Guy Cecala, publisher of industry publication Inside Mortgage Finance.

Lenders typically like to sell loans to both Fannie and sister agency Freddie Mac to play them off each other. So Bank of America's decision could mean it can't offer the best rates, Cecala said.

Bank of America said on Thursday it stopped selling home-purchase loans and some refinanced mortgages to Fannie Mae, a government-sponsored entity that buys loans to replenish the liquidity of banks. The move sparked concern that funding for mortgages could tighten if more banks refused to sell their loans to Fannie and Freddie.

The move does not mean a lot to the mortgage market, because Bank of America provided only 3 percent of the loans Fannie bought in the fourth quarter of 2011 and the bank still plans to sell mortgages to Freddie, or hold them on its own books.

It also does not mean much to Fannie, which can buy loans elsewhere.

Read the rest of the article at the Chicago Tribune

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