Commercial Loans and Fun Blog

What Happened to New York Community Bank?

Posted by George Blackburne on Fri, Mar 8, 2024

I saw this analysis on LinkedIn or X recently, so I thought I'd share.  I can't find the author again to give him credit.  Sorry.


Free Book, "How To Invest  in 12% First Trust Deeds"


Screen Shot 2024-03-08 at 3.36.17 PM


Follow George on Twitter Hit the Follow Button Next


What happened to NY Community Bank yesterday? The stock was $10 in January, yesterday it dropped below $2 (an 80% drop from January). An investor group led by former Trump Treasury Secretary Steve Mnuchin injected $1B of capital, removed all legacy board members, and replaced the CEO Allesandro DiNello (who had the job less than a week) with Joseph Otting, former head of the OCC. The stock popped back up to ~$4 on the news.

This is a $100B bank, not some mom-and-pop shop. It's turning into a convention of ex-government officials too.

Plus, this isn't Mnuchin's first rodeo rescuing a failing bank. In 2009, with an FDIC assist, he swooped in and bought IndyMac. He eventually made hundreds of millions when he sold IndyMac to CIT Group. Which leads to the question: Why did this happen?


Apply For a Commercial Loan to Blackburne & Sons


Screen Shot 2024-03-08 at 3.19.30 PM


Free List of 3,159 Commercial Lenders  Sort By Your Own Criteria


NYCB bought Flagstar in 2022. Flagstar has an excellent mortgage servicing platform with about $300B in loan servicing. This has a high value and can be sold; but if I'm understanding this correctly (please chime in if I'm misinformed), the fact that Moody's downgraded NYCB to below-investment-grade significantly limits their capital market flexibility.

Without an investment grade credit rating, banks aren't allowed to hold escrow balances for conventional or government loans. If that's true, I think they have to sell the Flagstar loan servicing business.

And why did they get downgraded?


Submit Your Loan to 750 Commercial   Lenders Using  It's Free!


Screen Shot 2024-02-03 at 1.13.42 PM


Free Commercial Loan Placement Kit


NYCB's big problem is its $40B multifamily CRE portfolio, made up mostly of rent-controlled apartments. In 2019, Governor Kathy Hochul signed the Housing Stability and Tenant Protection Act (HSTPA) into law. Per Chris Whalen, "...all banks in New York that hold rent stabilized assets on the books are now considered impaired... several banks in New York City may fail as a result."

What did this rent control law do that is so onerous?

Well, I think the gist of it is this: if a renter leaves an apartment, the landlord has no right - no right - to raise the rent on that apartment for a new tenant more than 2%. The law prior to 2019 was a max 20% increase.


Free Commercial   Loan Software


Screen Shot 2024-03-08 at 3.20.38 PM


Free Commercial  Loan Calculator


This law dis-incentivizes landlords from investing any capital to improve the look and feel of apartment buildings. They will just sit there and deteriorate, and drop in value.

Think about it: why would you put any money into an existing building if you can't pass on the expense into higher rents to new tenants? It's not worth it.

So it's a Law of Unintended Consequences situation. A law passed to benefit renters will slowly deteriorate living standards for renters. Investors will sell and leave NYC and move to a location where they have the freedom to pursue profits.


Nine-Hour Video Training Course  How to Broker Commercial Loans


Screen Shot 2024-03-08 at 3.21.18 PM


Earn HUGE Loan Servicing Fees  Become a Hard Money Lender


Get Both Video Training   Programs For Just $849.


Puts the whole NYCB / Signature Bank situation in a new light, right?


Huge Referral Fees!  Free Insider's Guide


Screen Shot 2024-03-04 at 6.40.10 PM


How To Market For Commercial Loans   Video Course 


Subscribe to the Commercial   Loans and Fun Blog


Topics: New York Rent Control