What If My Loan Is Still With A Bridge Bank?

• Jurisdiction: United States,Federal
• Author: Mr William Hanlon and David M. Bizar
• Law Firm: Seyfarth Shaw LLP
• Published date: 17 April 2023

When Signature Bank and Silicon Valley Bank were placed in receivership, the Federal Deposit Insurance Corporation (FDIC) transferred their respective assets to "bridge depository institutions" a/k/a "bridge banks."¹ The Signature Bridge Bank, N.A. and Silicon Valley Bridge Bank, N.A., subsequently sold "substantially all" of their assets to Flagstar Bank, N.A. (Flagstar) and First-Citizens Bank & Trust Company (First-Citizens), respectively, but excluded certain assets:

• $60 billion dollars of loans held by Signature Bridge Bank remain in receivership for disposition by the FDIC.²
• $90 billion in securities and "other assets" held by Silicon Valley Bridge Bank remain in receivership for disposition by the FDIC.³

Flagstar did not acquire merchant bank accounts, credit card loans, multi-family loans, construction loans, development loans and subscription finance loans.⁴ The Wall Street Journal recently reported that the FDIC has retained Newmark Group to sell roughly $60 billion of SB loans that were not sold to Flagstar Bank.⁵ These loans, many of which are reported to constitute New York-based commercial property loans, remain under FDIC receivership and are expected to be sold off at enough of a loss to cause reconsideration of the market value of property loans generally.⁶

The FDIC as receiver and First-Citizens entered into a loss-share transaction for the commercial loans that First-Citizens purchased, under which the FDIC as receiver and First-Citizens will share in the losses and potential recoveries.⁷ The FDIC projects that the loss-share transaction will maximize recoveries on these assets by keeping them in the private sector.⁸

Am I still required to pay my loan?

Yes. The FDIC continues to instruct borrowers of loans, transferred or not, to continue making their loan payments as usual unless notified otherwise. ⁹ Borrowers who stop making their loan payments should...