Guy Cecala, publisher of Inside Mortgage Finance said that BofA`s move can make them less competitive, since it will have one less bidder for it loans. By stopping to sell home-purchase loans to Fannie Mae, the BoA may experience issues with liquidity and can cause problems for the bank later on. Cecala adds that if more bank refuse to sell their loans to Fannie Mae or sister agency, Freddie Mac, tighten for funding mortgages can tighten and can limit liquidity of already struggling banks.
Analyses following this move showed that it could have limited to no effect on the mortgage market since BofA provided only 3% of the total loans purchased by Fannie Mae in the last quarter of last year. Despite the rift between Fannie and BofA, the bank still plans to sell some of its loans to Freddie Mac.
Fannie Mae remains undaunted after Bank of America`s announcement since it still has a large market and can purchase loans anywhere. Ally Financial Inc. and Citigroup, two of the biggest lenders in the industry says that government-sponsored entities are still the best partners to securitize their loans. Other financial institutions like Wells Fargo & Co. and JP Morgan Chase & Co. refused to release statements.
For John Taylor, CEO of the coalition for community investment, Bank of America`s move is not a cause of concern but it a number of lenders decide to stop selling to Fannie and Freddie, then something must be done. This statement is proof of BofA`s shrinking role in the mortgage market and estimates show that it will have more difficulty in recovering from the financial crisis if it does not reconsider.
Fannie Mae and Freddie Mac were taken over by the government in 2008 following the bankruptcy of Lehman Brothers. Their main aims were to provide liquidity to the financial market by repurchasing bad mortgage loans from lenders or repackaging them into securities. Relationship between the government entities and BofA soured after they asked banks to repurchase bad loans sold to them during the housing boom. For 2011, Bank of America sold $58.9 billion of its loans to Fannie Mae.