JPMorgan to buy almost $2B of mortgages in the PacWest deal: reports

JPMorgan Chase will buy nearly $2 billion worth of mortgages to grease Banc of California‘s purchase of PacWest Bancorp, Bloomberg reported.

The bank entered into an agreement to buy $1.8 billion of single-family residential loans at a discount, according to the outlet. 

Banc of California and PacWest announced on Tuesday an all-stock merger with a $400 million equity raise from Warburg Pincus and Centerbridge Partners to create a bank with $36 billion in assets. 

Banc of California said Tuesday in a presentation that it entered into a “contingent forward asset sale agreement” for its residential mortgage portfolio in a presentation without naming the buyer.

The mortgage transaction is expected to close by late 2023 or early 2024 when the merger is scheduled to be completed, Reuters reported. 

Banc of California and PacWest plan to sell about $7 billion of loans, mortgage bonds and other assets in their securities portfolios to pay down expensive debt, according to Bloomberg.

It’s not clear whether JPMorgan Chase plans to retain the $1.8 billion in loans or sell them to investors.

Banc of California and JPMorgan declined to comment.

JPMorgan acquired First Republic Bank‘s mortgage loans – almost entirely jumbos – when it bought the troubled bank in May.

JPMorgan acquired about $173 billion in First Republics loans – of which about 60% of First Republic’s loans were single-family mortgages, according to the firm’s annual report

Following the earlier failures of the three regional banks — Silicon Valley Bank, First Republic and Signature Bank — there was fear that PacWest would be next to fail.

PacWest has 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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