Bank won’t sell mortgages to Fannie

Bank of America will no longer sell new mortgages to Fannie Mae, underscoring tensions in a fight between two giants of the home loan market over billions in losses.

It is a major escalation in a legal battle over how many defaulted mortgages Bank of America must buy back from Fannie because the loans did not conform to underwriting standards. Fannie Mae backs about 40 percent of US mortgages. Bank of America said its customers won’t be hurt by the decision and can make up for the loss of Fannie by turning to Freddie Mac or Ginnie Mae, other government-sponsored mortgage buyers.

Bank of America agreed in January 2011 to buy back $2.5 billion in soured mortgages from Fannie and Freddie, but that deal left the door open to future claims from Fannie.