NEW YORK (BLOOMBERG) -- Flagstar Financial Inc. Chief Executive Officer Joseph Otting is preparing for Zohran Mamdani’s New York City.
Mamdani, the Democratic Socialist who’s the frontrunner in New York’s mayoral race, has centered his campaign on making housing affordable and proposed freezing rents. That has caught the attention of firms like Flagstar, a major lender to owners of apartment buildings in the city.
“I think Mamdani has ran an unbelievable campaign,” Otting, the former US comptroller of the currency, said Tuesday at the Barclays Global Financial Services Conference. “We all have to live with the reality as he could become the mayor of New York City.”
Otting said the bank found a “a number of downgrades” in credit quality in its portfolio of rent-regulated apartment building loans last year. But this year, based on data from 2024, the portfolio has held up better, he said.
“What’s happened in that business is you basically had your revenue hedged, but your expenses unhedged — the exact opposite of what you’d want to look like,” he said. “Insurance rose, HVAC systems were up — a lot of things drove costs up.”
Flagstar carried almost $10 billion of loans to apartment buildings that are at least 50% rent-regulated as of midyear, according to a July presentation. Otting said he expects that number to decline over the next two years as the bank largely stopped making new loans against rent-regulated buildings after he joined the bank in 2024.