Bank of America said Thursday that it would no longer sell new mortgages to Fannie Mae.
This is the latest news in the continuing saga of what role the mortgage giants Fannie Mae and Freddie Mac will play in this country’s residential housing future, and is the latest news in the fight over how many defaulted mortgages Bank of America will have to buy back from Fannie Mae because the original loans had not conformed to proper underwriting standards.
In mortgage circles this is huge news. Bank of America was Fannie Mae’s third-largest provider last year and the bank originated $156.1 billion in mortgages last year of which $37.7 billion were sold to Fannie Mae.
Meanwhile, Fannie and Freddie face questions over what role they will play in the housing market. On February 21st the Treasury Department’s new housing reform report was issued, and the report concluded that Fannie Mae and Freddie Mac must be eliminated - period.
Of course if Fannie Mae and Freddie Mac are eliminated most economists expect that average interests would increase and that it would be harder to obtain a traditional 30 year fixed rate mortgage.