Bank of America will stop selling certain mortgages to Fannie Mae over a dispute with the government-sponsored enterprise concerning repurchase claims, HousingWire reported Feb. 23. The decision was prompted by recent changes in mortgage insurance policies.

The bank said that it will no longer place non-Making Home Affordable Program refinance first-lien residential mortgages into Fannie mortgage-backed securities.

According to a regulatory filing with the U.S. Securities and Exchange Commission, as of Dec. 31, 2011, 74 percent of the mortgage insurance rescission notices (buyback requests) received by Fannie Mae had not been resolved. However, Fannie began exercising repurchases with Bank of America nonetheless. As outlined in Fannie Mae’s policy, mortgage insurance rescissions must be resolved in a timely fashion.

“We have informed Fannie Mae that we do not believe that the new policy is valid under our relevant contracts with (Fannie Mae) and that we do not intend to repurchase loans under the terms set forth in the new policy,” Bank of America told HousingWire.

The bank noted that the risk of repurchases on non-MHA mortgages is significant and could have a material adverse effect on the organization’s cash flow, financial well being and overall operations.

“We are not able to predict changes in the behavior of the GSEs based on our past experiences,” the bank noted in its regulatory filing, reported by HousingWire. “Therefore, it is not possible to reasonably estimate a possible loss or range of possible loss with respect to any such potential impact in excess of current accrued liabilities.”

In 2010, Bank of America sold $53 billion in loans to Fannie, which made it the GSE’s second largest customer. The bank said it would most likely divert the majority of its loan sales to Freddie Mac and Ginnie Mae.

Fannie Mae issued a news release Feb. 24 stating it hoped to resolve the issue with Bank of America. “Fannie Mae has broad dealings with Bank of America,” spokeswoman Kelli Parsons said. “In this matter, Fannie Mae remains committed to working with Bank of America to resolve their repurchase issues with us and in doing so, to fulfill its contractual obligations. Fannie Mae will continue its efforts in the best interests of the company and the taxpayers.”