Bank Of America Buys Nearly $1B Multifamily Loan Portfolio At 8% Discount
Residential lender HomeStreet waved goodbye to 2024 by selling nearly $990M in multifamily loans to Bank of America.
The Seattle-based company offloaded the loans for an 8% discount to their unpaid balance, bringing in about $906M of proceeds in the transactions from Bank of America. Most of the proceeds were used to pay down borrowings from the Federal Home Loan Bank, which carry higher interest rates than HomeStreet’s core deposits.
The sale is the first step toward returning the bank to profitability, HomeStreet President and CEO Mark Mason said in a statement.
“The pricing of the loan sale reflects the current interest rate environment and that the loans being sold are primarily lower yielding loans with longer duration than the overall portfolio,” Mason said.
HomeStreet is banking on the sale — and the payoff of FHLB loans — allowing it to return to profitability following four consecutive quarters of adjusted losses after the company reported a net loss of more than $7M in the third quarter. The sale was completed in two parts: one transaction for about $653M and the other for about $338M, according to a regulatory filing.
HomeStreet has been seeking to lessen its commercial real estate exposure and originally attempted a merger with Denver-based FirstSun Capital Bancorp. In November, the deal was terminated due to regulatory disagreements, Banking Dive reported.
In recent news, banks have begun reducing exposure to commercial real estate loans as higher interest rates have caused borrower distress across many markets, The New York Times Reported.
Multifamily specifically has faced dramatic increases in distressed properties. The distress rate among apartment properties tied to CMBS loans increased by 185% from January to June 2024, according to Cred IQ.
At the beginning of 2024, 49 banks held over 5% of their portfolios in multifamily loans totaling $613B, which poses potential issues as supply has outpaced demand in some markets, according to a Fitch Ratings analysis.
