BofA weights potential responses to counter Fannie Mae

Bank of America Corp. said it is weighing how to counter Fannie Mae’s more aggressive demands that the bank repurchase faulty mortgages as Chief Executive Officer Brian T. Moynihan seeks to reverse a share slide.

“We are considering a number of potential responses to this changed behavior,” the Charlotte, North Carolina-based lender said in a memo distributed to employees and dated Aug. 7. “It is unknown whether Fannie Mae’s continuing claims will result in increased representation and warranty liability.”

Bank of America, the largest U.S. lender by assets, is seeking to assure staff and investors that the company can withstand investor demands for compensation on soured loans. American International Group Inc. today sued the bank to recover more than $10 billion in losses on mortgages, and government sponsored enterprises including Fannie Mae have been demanding more reimbursement following a $3 billion deal in January.

“Fannie Mae has modified its approach to repurchase claims, including claims on loans where over two years’ worth of payments have been made in a way that diverges from our longstanding course of dealing with them,” according to the memo. “We believe, however, that we have properly accrued for all GSE representation and warranty exposure taking into consideration this changed behavior to date.”

Bank of America dropped $1.16, or 14 percent, to $7.01 at 12:18 p.m. in New York Stock Exchange composite trading. The company has slumped by almost half this year.