Banc of California selling $2B in DSCR loans

Roughly eight months after acquiring PacWest Bancorp in a rescue deal, Banc of California is selling roughly $2 billion in business-purpose residential mortgage loans, according to Bloomberg.

PacWest had already sold the servicing on the debt service coverage ratio (DSCR) loans, which were originated by its subsidiary Civic Financial Services, before Pacwest was acquired by Banc of California in late 2023.

Bids were due on June 28 and Morgan Stanley led the bidding process, according to Bloomberg.

In July of 2023, Bloomberg reported that JPMorgan Chase pledged to buy nearly $2 billion worth of mortgages to grease Banc of California‘s purchase of PacWest Bancorp. The bank entered into an agreement to buy $1.8 billion of single-family residential loans at a discount.

More recently, regional banks have been looking to shed assets ahead of the Basel III Endgame regulations. Private credit lenders, which do not fall under the proposed regulatory changes, are often the acquirers.

PacWest had a similar business model to First Republic Bank, which served wealthy clients by offering interest-only mortgages in which the borrower didn’t have to pay back any principal for the first 10 years of the loan. As with many other regional banks, PacWest had billions of dollars worth of unrealized losses in its bond portfolio and uninsured deposits that were at risk of being pulled. 

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