On Monday, the FDIC seized First Republic Bank and quickly sold it to JPMorgan Chase, marking the third bank failure in recent months. Its collapse leaves a void in the real estate market.
First Republic was known for offering rock-bottom mortgages to wealthy home buyers (like Mark Zuckerberg and Ben Affleck) and multifamily landlords. If most banks offered a 5.5 percent rate, First Republic would offer closer to 5 percent, a client of the bank said.
In the end, those low rates would be the bank’s undoing. As the Fed raised rates, First Republic found itself paying more on its customers’ deposits while most of its mortgages were issued at lower rates.
The sale included almost $150 billion in real estate debt, with $103 billion in residential mortgages, $23 billion in multifamily loans, and nearly $11 billion in other commercial real estate debt.
Valley Bank hopes to fill the void left by the failed banks, especially in New York. The New Jersey-based lender has $57 billion in assets and significant exposure to commercial real estate. Valley’s business has expanded rapidly in the past few weeks. But now it has its own problems, including a 20 percent stock price drop this week.
PacWest, another regional bank out of Los Angeles, is considering a sale after experiencing its own stock struggles. The firm has roughly $3.8 billion in commercial loans, $5.5 billion in multifamily loans, and $15.4 billion in residential mortgages.