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Plummeting commercial real estate values may prompt New York Community Bancorp to tap a more stable asset to shore up its balance sheet: residential mortgages originated when interest rates were low.
New York Community Bancorp (NYCB) is looking to pledge about $5 billion in home loans originated by Flagstar Bank as backing for a “synthetic risk transfer” that would bolster its capital reserves, Bloomberg reported Wednesday, citing anonymous sources with knowledge of the talks.
NYCB, which acquired Flagstar Bank 2022, is one of a number of regional lenders that could need fresh capital if the performance of loans they made to commercial developers continues to deteriorate. With office and retail vacancies remaining elevated in many markets after the pandemic, the properties that served as collateral for the loans are, in some cases, worth less than the outstanding balance on loans.
Since reporting a $252 million fourth-quarter loss on Jan. 31, NYCB shares have lost more than half their value. Shares in the bank, which hit a 52-week high of $14.22 on July 28, briefly touched a 52-week low of $3.60 Wednesday before climbing back above $4.
In reporting earnings, NYCB said it boosted its provision for credit losses by 533 percent, to $833 million. Fourth quarter charge-offs of $117 million in multifamily and $42 million in commercial real estate loans also sounded alarm bells with investors. Those concerns were amplified when Fitch Ratings and Moody’s Investors Service downgraded NYCB’s credit ratings, which could make it more costly for the bank to borrow money.
“In terms of financial strategy, the bank is seeking to build its capital but just took an…