BofA Halts Routing New Mortgages to Fannie Mae

Bank of America Corp., the second- biggest U.S. lender by assets, is stopping the sale of new home loans to government-owned Fannie Mae as a dispute over who should bear the costs for defective mortgages escalates.

The bank is cutting off Fannie Mae from loans starting this month, except for modifications and some refinancings, because of the U.S.-controlled company’s stance on repurchases, Bank of America said yesterday in a filing. The firms are in talks to end the disagreement, the bank said.

Chief Executive Officer Brian T. Moynihan is seeking to limit additional costs from faulty loans after the 2008 takeover of Countrywide Financial Corp. helped saddle the Charlotte, North Carolina-based bank with about $42 billion in expenses. In November, the lender said it refused to cooperate with what it deemed a new Fannie Mae policy that required loan repurchases if an insurer drops coverage.

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