FDIC Looking to Sell $60 Billion Loan Portfolio It Acquired From Failed Signature Bank

The Federal Deposit Insurance Corp. logo at its headquarters in Washington, on Feb. 23, 2011. Jason Reed/Reuters

The Federal Deposit Insurance Corporation (FDIC) is looking to sell a $60 billion loan portfolio in the new few months, which it acquired in receivership following the collapse of Signature Bank last month.

The portfolio mainly consists of commercial real estate loans (CRE), commercial loans, and a small pool of single-family residential loans, the FDIC said in a statement.

The CRE loans included a number of multifamily properties, mostly in New York City, said the federal regulator.

Signature Bank ended last year with $33.13 billion of CRE loans, according to its last annual report before it went under.

The failed bank’s deposits and some of its loans were taken over by a unit of New York Community Bancorp (NYCB) on March 20, after the FDIC was left with its remaining assets, in the wake of its failure on March 12.

NYCB bought more than $34 billion in Signature’s deposits, as well as $13 billion in loans and 40 bank branches.

FDIC Still Saddled With Signature Assets After Deal With Bank

However, the $60 billion in CRE loans were excluded from the deal with NYCB, which were left in the FDIC’s possession pending a sale, the agency announced at the time.

This remaining package included $11 billion of toxic waste loans against rent-stabilized New York City apartments, whose values have tumbled in recent years.

One of the issues with these so-called toxic loans is that rent-stabilized apartment price hikes are capped under New York State law.

Landlords were previously able to increase rents by larger increments when a tenant moved out, or could convert the buildings to deregulated status once rates rose beyond certain levels.

A new law passed in 2019 placed new restrictions on owners, however, limiting investor demand for the regulated properties and making them undesirable.

“The FDIC has a statutory obligation, among other factors, to maximize the preservation of the availability and affordability of residential real property for low- and moderate-income individuals,” it said.

The regulator said it would review the CRE loans secured by multifamily residences that are rent-stabilized or rent-controlled, which it calls “an important source of affordable housing in New York City.”

“For this portion of the portfolio, the FDIC plans to reach out to state and local government agencies, as well as community-based organizations, to inform them of the FDIC’s efforts and to seek their input as the FDIC develops its marketing and disposition strategy,” it explained.

Meanwhile, the FDIC hired Newmark & Company Real Estate as an adviser to help it with the sale of about $60 billion of Signature Bank loans, which is expected to take place over the next 90 days, reported Bloomberg.

The sales process will be handled by Douglas Harmon and Adam Spies, Newmark’s co-heads of U.S. capital markets, as well as Dustin Stolly and Jordy Roeschlaub, co-presidents of debt and structured finance, and executive managing director John Howley, sources told Bloomberg.