Bank of America Corp. (BAC) dropped the most in the Dow Jones Industrial Average and touched levels last seen in March 2009 as investors speculated on how much faulty mortgages will cost the lender.
The lender, ranked second among U.S. banks, told Fannie Mae it won’t cooperate with the U.S. mortgage firm’s new stance on loan buybacks, according to a regulatory filing. This may set up the bank for penalties or other sanctions, according to Washington-based Fannie Mae.
Fannie Mae, along with Freddie Mac, buys mortgages from lenders and packages them into securities for sale to investors. Banks can be required to buy back the loans if defects are found. Bank of America is disputing Fannie Mae’s demand that lenders repurchase mortgages or cover any losses themselves if an insurer drops coverage, according to the filing.
Faulty mortgages and foreclosures have already cost the Charlotte, North Carolina-based bank about $40 billion since 2007, according to data compiled by Bloomberg.
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