02/23/2012 07:15 pm ET Updated Apr 25, 2012

BofA Tired Of Fannie Mae, Stops Selling Some Mortgages To Them

* BofA cites Fannie Mae repurchase claims

* Bank still selling loans to Freddie Mac

* BofA freezing pension plan June 30

By Rick Rothacker

Feb 23 (Reuters) - Bank of America Corp has stopped selling some mortgages to Fannie Mae because of a dispute arising from claims related to soured home loans, the bank said in a filing on Thursday.

Starting in February, the second-largest U.S. bank said it stopped delivering home-purchase loans and certain refinanced mortgages to be packaged into Fannie Mae loan securitizations, the bank said.

Bank of America and other large banks have absorbed billions in losses related to requests by Fannie Mae and other investors to buy back defective loans sold to them by banks during the housing boom.

The bank didn't renew a contract with the government-controlled mortgage entity because of "ongoing differences" with Fannie Mae, including repurchase claims, according to the bank's annual 10-K filing. (The filing can be found at)

The Charlotte, North Carolina-based bank is still selling loans to the other major government-controlled mortgage entity, Freddie Mac, bank spokesman Jerry Dubrowski said. It also can hold mortgage loans on its own balance sheet, he said.

The bank remains in talks with Fannie Mae and continues to sell Fannie Mae loans refinanced through the government's Making Home Affordable program, according to the filing.

Bank of America has been dramatically scaling back its mortgage operations after suffering huge losses from its 2008 purchase of subprime lender Countrywide Financial. Last year, it stopped buying mortgages originated by smaller banks, which dropped it to fourth from second in U.S. mortgage origination rankings.

"Our company has streamlined," Dubrowski said. "We are focused on providing credit for our customers, and this decision is consistent with that. We have ended the past practices of Countrywide, which had a significant relationship with Fannie Mae."

Fannie Mae spokesman Andrew Wilson declined to comment.


In Thursday's filing, Bank of America also said it will freeze the benefits employees have earned in its company pension plan as of June 30.

Employees will still be offered a 401(k) retirement plan in which they can set aside a portion of their compensation in an investment account. The bank matches up to 5 percent of employee contributions, and eligible employees will also receive an annual 401(k)contribution of between 2 percent to 3 percent of their salary, bank spokesman Scott Silvestri said.

The move is in line with changes at other large companies, Silvestri said.

Bank of America Chief Executive Brian Moynihan has been slashing costs and selling non-core businesses as he looks to boost profits and build capital to absorb mortgage-related losses. The bank's stock fell 58 percent last year, but the shares have revived this year, climbing 44 percent, as capital concerns have eased.

In the filing, the bank said it will continue to build capital through earnings, shed riskier assets and launch other initiatives. The bank issued 122 million shares of immediately tradable stock to certain employees in February in lieu of a portion of their cash bonuses. The bank may also continue to issue common stock in exchange for preferred stock and trust preferred securities, according to the filing.