Bank of America reported net income of $2.0 billion, less than expected, compared with $3.2 billion in the same quarter a year ago. BofA lost $2.39 billion in its residential mortgage unit, compared with a $2.07 billion loss in the same quarter a year earlier. Mortgage revenue dropped and expenses increased. BofA’s “representations and warranties provision” was $1 billion in the first quarter, compared to $526 million in the first quarter of 2010. The bank said more than half of the provision is attributable to mortgage repurchases funneled through Fannie Mae and Freddie Mac.

Fannie & Freddie are often lumped together, especially since they are both under the Federal Housing Finance Agency (FHFA). But Wall Street traders and mortgage investors have noticed a trend recently:

The Freddie Mac MBS market share has declined over the last few quarters, attributed to a combination of best execution strategies on the part of originators, acquisitions or closures of originators that were traditionally only Freddie Mac MBS issuers (like TBW & WAMU) and a more aggressive tightening/pricing of credit by Freddie Mac.

Between 7/10 and 3/11, the outstanding balance of Fannie MBS’s increased by $17 billion whereas it has decreased by $75 billion for Freddie Mac MBS during this period. Freddie Mac’s share of new issuance declined from more than 40% in 2005-07 to around 36% in 2011, much due to BofA & Wells reducing the amount they securitize through Freddie, as well as WAMU and TBW’s demise.

Sellers are reporting that the historical Gold-Fannie spread has suffered in the last 6 months, and originators are seeing better execution by putting loans into Fannie securities.