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Washington Federal Bank to Sell Home Loans to BoA
Federal Bank of Washingtona wholly owned subsidiary of WaFd, disclosed its agreement to sell certain multifamily commercial real estate loans to Bank of America for around US$2.9 billion.
WaFd said on a Friday (May 17) archiving as Security and Exchange Commission (SEC) that the deal involves 2,000 multifamily commercial real estate loans with an aggregate unpaid principal balance of $3.2 billion.
This move comes at a time when the commercial real estate sector is struggling, and the deal helps Washington Federal Bank reduce its exposure to that market, Reuters reported Friday.
The commercial real estate sector has been challenged by both higher financing costs and lower occupancy rates, causing concern among investors and regulators, according to the report.
The sector was one of three potential problems around financial stability highlighted by Federal Reserve Governor Lisa Cook in a speech given on May 8.
O commercial real estate The industry continues to feel the effects of the pandemic and changes to the way many people live, shop and work, Cook said. Multifamily property values, in particular, have fallen over the past year.
“Overall, I see CRE [commercial real estate] the risks are currently considerable but manageable, and I will pay close attention to the sector in the short to medium term,” Cook said.
In February, JPMorgan Chase CEO Jamie Dimon told CNBC that because many homeowners are already dealing with the current level of stress and the challenges of lower appraisals and higher interest rates are already known, only “pockets” of the commercial real estate sector will face problems as long as the country avoids a recession.
However, if rates rise and there is a recession, there will be more problems in the sector – and some banks will have bigger problems in the commercial real estate sector than others, Dimon added.
In April, New brand CEO Barry Gosin told the Financial Times (FT) that banks face a $2 trillion “wall” of real estate debt and must reduce their exposure to commercial real estate as that debt matures over the next three years.
“Banks will be under pressure,” Gosin said.
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