Flagstar Bancorp in Troy, Mich., has disclosed exposure to a commercial borrower.
The $18.4 billion-asset company said in its quarterly filing with the Securities and Exchange Commission that it has a $69 million outstanding loan to an unnamed borrower that is shutting down its reverse mortgage business.
Flagstar said the underlying collateral has a fair value of $35 million to $40 million. Flagstar said the borrower has other potential sources of repayment, including other assets, a personal guarantee and other legal remedies.
The filing disclosed that there is another $5 million outstanding on a related warehouse loan, though it is collateralized by agency mortgage loans and Flagstar said it expects to be fully repaid.
Bose George, an analyst at Keefe, Bruyette & Woods, wrote in a note to clients that the high-end exposure could equal 50 cents a share, taking into account the size of the loan and the value of the collateral.
“We would note that the loss is happening in the reverse mortgage business, which is a relatively small niche in the mortgage market,” George added.
