Bank of America Refuses to Purchase Buybacks

A Business Week article covers the story of Bank of America refusing to adhere to Fannie Mae's buyback provision. Fannie Mae has demanded that lenders repurchase mortgages or pay any losses if the insurer lets go of coverage. Previously, Fannie Mae had not fully enforced this law as it did not want to harm the relationships it had with lenders during a time of lower defaults. Now that defaults are higher, Fannie Mae is standing by their contracts which spokeswoman of Fannie Mae, Amy Bonitatibus, says clearly state that once a mortgage insurance company drops the required mortgage insurance, the lender is subject to a buyback. Bank of America has different ideas regarding the contracts validity and is concerned this policy will result in higher repurchasing costs. According to Bank of America, due to Fannie's new aggressive nature, it is hard to determine what the possible loss will be from their policy which demands Bank of America repurchase the loans rejected from mortgage insurance or have 90 days to appeal.