Flagstar Multifamily Late Payments Jump 68% as Nonaccruals Hold

Flagstar Bank's multifamily loans 30 to 89 days past due rose 68% in the third quarter to $392 million, the bank said Friday, Oct. 23, even as its multifamily nonaccrual loans held steady at $2.13 billion. The bank said its provision for credit losses rose $58 million, primarily from the impact of higher interest rates, including on its New York City rent-regulated multifamily portfolio.

What did Flagstar report on multifamily and CRE credit?

Problem loans that had already stopped accruing barely moved. Early-stage delinquencies rose. Total nonaccrual loans held for investment were $2.82 billion, or 4.55% of loans, compared with $2.80 billion, or 4.59%, on June 30, according to the earnings release Flagstar filed with the Securities and Exchange Commission.

Flagstar measure	Sept. 30, 2026	June 30, 2026	Sept. 30, 2025
Multifamily loans	$25.95 billion	$26.93 billion	$30.47 billion
Multifamily nonaccrual loans	$2.13 billion	$2.13 billion	$2.44 billion
Multifamily loans 30–89 days past due	$392 million	$233 million	$344 million
Multifamily loans 90+ days past due, still accruing	$50 million	$38 million	—
CRE nonaccrual loans	$462 million	$471 million	$551 million
CRE loans 30–89 days past due	$79 million	$30 million	$117 million
CRE loans 90+ days past due, still accruing	$53 million	$13 million	—

Source: Flagstar Bank third-quarter 2026 earnings release. Past-due figures are loans held for investment that are still accruing. A dash means the release showed none.

By our math, multifamily nonaccruals equal about 8.2% of the bank's multifamily loans, and CRE nonaccruals about 5.7% of its $8.1 billion in other commercial real estate loans.

Multifamily net charge-offs fell to $50 million, or 0.76% of average multifamily loans annualized, from $80 million, or 1.17%, in the second quarter. CRE net charge-offs rose to $13 million from $1 million. Substandard loans rose $248 million, or 4%, and criticized and classified loans rose $670 million, or 6%, the bank said.

Why did Flagstar's provision rise?

The allowance stayed at $869 million, so the higher provision mostly covered $74 million in net charge-offs. Flagstar said reserve increases for C&I loan growth and for higher rates, including on the rent-regulated multifamily book, were offset by the smaller multifamily portfolio. Allowance coverage was 1.63% on all multifamily loans and 2.97% on multifamily loans where 50% or more of the units are rent-regulated.

Chief Executive Joseph Otting said results reflected "a higher interest rate environment, deposit competition, persistent inflation, as well as the continuing impact of rent regulation policies on our New York City multi-family portfolio, which pressured our credit costs." He said full realization of the bank's long-term objectives "has shifted to 2028 from 2027."

Is Flagstar still making CRE loans?

Yes, but far less than is running off. The combined multifamily and CRE portfolio fell $1.1 billion, or 3%, to $34.1 billion. CRE par payoffs totaled $1.2 billion, of which 35% were substandard, while the bank originated about $375 million of new CRE loans. New York City multifamily loans fell $531 million, or 4%.

For borrowers whose loans pay off or mature at banks that are shrinking CRE books, the refinance often moves to other lenders, including debt funds; see our report on debt funds leading non-agency CRE lending. The pattern matches the stress in securitized multifamily debt shown in the CMBS delinquency rate Trepp reported for September.

Flagstar's earnings presentation notes it sold its mortgage warehouse business in 2024. For how those facilities work for lenders, see our warehouse line of credit guide. For other banks' third-quarter CRE numbers, see our roundup of regional bank CRE nonaccruals.