Fannie Mae buys mortgages sold to them by lenders and then sells them to investors by them means of packaged securities. Fannie Mae requires that borrowers obtain MI, mortgage insurance, if the loan exceeds 80 percent of the value of the home.
Bank of America is concerned that insurance rejections will result in heighten repurchasing costs for them and after the Countrywide acquisition in 2008, they are making an effort to reduce chances of any additional costs accrued through faulty loans.
Bank of America will be selling their new loans to Freddie Mac and Ginnie Mae as well as potentially keeping some loans in house. This is causing speculation that Fannie Mae may not really worry about losing Bank of America's business as they will just be selling their loans to a different section of the U.S. controlled finance firms.
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