- Flagstar returned to profitability in Q4 2025 after posting losses earlier.
- The bank reduced its CRE loan exposure by over $12B since 2023, with multifamily loans down $1.5B in Q4 alone.
- Challenges persist with $3B in troubled loans, mainly tied to NYC multifamily and rent-regulated assets.
- Flagstar plans renewed CRE originations as it manages and offloads problematic assets.
Profit Return Follows CRE Reduction
Per Bisnow, Flagstar Bank, formerly New York Community Bancorp, reported a $21M profit in Q4 2025—its first positive quarter after significant prior losses. The turnaround was fueled by a major pullback from commercial real estate, particularly multifamily loans, helping the bank exceed analyst expectations on both revenue and earnings per share.
CRE and Multifamily Exposure Down
Flagstar cut its commercial real estate exposure to $38.3B by the end of 2025, down from $50.6B two years earlier. In the most recent quarter, multifamily loans saw a $1.5B reduction. The bank has reviewed 97% of its NYC rent-regulated multifamily loan book, a portfolio with $14.6B in holdings. However, $2B of these loans are on nonaccrual status, reflecting continued stress in the multifamily segment.
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NYC Rent Regulation Adds Risk
Flagstar remains heavily exposed to New York multifamily, where rent regulations and declining asset values have driven many buildings into the red. The bank faced a $113M write-off tied to loans on over 5,000 rent-stabilized units recently sold at auction. It has also begun marketing hundreds of millions in troubled multifamily debt, signaling an effort to clear distressed assets. Regulatory and political developments, including the prospect of rent freezes, continue to pose challenges for lenders and landlords alike.
Originations Resume Amid Ongoing Scrutiny
Despite reducing its multifamily loans, Flagstar isn’t exiting CRE lending. Executives say Flagstar will replace sold-down assets with new originations, focusing outside New York. Target markets include Michigan, California, and Florida. The bank plans to remain active in commercial real estate lending despite recent reductions.
Management expects political and legal changes in New York to reshape the multifamily loan market. However, ongoing loan book reviews and stronger risk management have helped stabilize the balance sheet.
