Approximately $5 billion in mortgage warehouse loans are changing hands from Flagstar Bank to JPMorgan Chase as part of the former’s exit from warehouse lending.
New York Community Bancorp (NYCB), the parent company of Flagstar, announced that it has entered into a commitment letter with Chase regarding the proposed sale of loans. The sale is expected to close in the third quarter, subject to due diligence, negotiations and customary closing conditions.
Although NYCB and Flagstar intend to leave warehouse lending, they have confirmed that Flagstar will remain active in financing mortgage servicing rights. Joseph Otting, president and CEO of NYCB, said in a statement that “the mortgage business remains an important business for the company and we will continue to provide our mortgage customers and partners the same great service that they have come to expect from Flagstar.”
NYCB described the sale as a strategic move aimed at bolstering capital and liquidity, with proceeds to be reinvested into cash and securities.
“Consistent with my guidance during our recent earnings call, we are moving forward quickly to implement our strategic plan, which focuses on improving our capital, liquidity and loan-to-deposit metrics,” Otting said. “The mortgage team at Flagstar built a first-class warehouse business, which is reflected in our ability to execute on an accretive transaction with JPMorgan.”
The move comes after a somewhat tumultuous start of the year for NYCB, which announced a dividend cut and an unexpected loss in January and had its long-term issuer rating downgraded by Moody’s in February. Prior to that, NYCB had been perceived as having a position of strength by investors and observers, having acquired $38 billion in assets (and assumed $36 billion in liabilities) from Signature Bank after the regional depository failed during the regional banking crisis of 2023.
NYCB acquired Flagstar Bank in December 2022.
