One of New York’s top lenders to rent-stabilized property owners is continuing to pull back its portfolio.
Flagstar Bank still has nearly $9.59 billion in loans tied to heavily rent-stabilized buildings on its books, according to an earnings presentation Friday. But that’s down about $324 million from the last time the bank reported its numbers, in July.
The decrease is part of Flagstar’s effort to right the ship after a disastrous 2024, when the company disclosed issues with its lending and sparked a stock sell-off that pushed it to the brink of collapse. The bank posted a net loss in the third quarter of 2025, but its smallest since 2023, at eleven cents per share.
About 60 percent of Flagstar’s loans to New York City multifamily buildings are tied to heavily rent-stabilized properties.
Of its loans tied to New York City rent-stabilized buildings, about 45 percent have some financial red flags, according to Flagstar. Nearly half of those red-flag loans are not accruing interest and have been charged off.
The value of those loans is equal to about 80 percent of the appraised value of the properties. Net profits of those properties are slightly higher than their annual debt service.
“We think we’re more than covered, were there to be any further degradation in this portion of the portfolio,” said Lee Smith, Flagstar’s CFO.
Those properties are 99 percent occupied, up slightly from last quarter, and 80 percent have seen a recent appraisal, according to Flagstar.
Mayoral frontrunner Zohran Mamdani has proposed freezing rents in rent-stabilized apartments. That would stymie revenue growth at a time the sector has seen growing distress, although the impact may not be felt for some time.
“The way you model that out is you just make the assumption they’re going to be flat revenues,” said Joseph Otting, Flagstar’s CEO. “You really need to understand the expense side because that’ll make the difference on whether these properties are positive on a cash flow basis.”
Expenses for New York real estate have gone up significantly, most notably insurance costs.
The bigger impact on the properties may come from reductions in interest rates, Smith said. That could benefit owners struggling with debt.
Flagstar has seen $372 million in net charge-offs for its total New York City multifamily portfolio since January 2024.
The bank will start originating new loans for commercial real estate, but outside New York, Smith said.
“This won’t be rent-regulated New York City loans,” Smith said. “We’re looking for high-quality, geographically-diversified CRE loans in other parts of that footprint — the Midwest, California, South Florida.”
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