New York Community Bancorp. (NYCB), the parent company of Flagstar Bank, is selling approximately $5 billion in mortgage warehouse loans to JPMorgan Chase Bank. A commitment letter was exchanged between the two entities, with the closing of the transaction remaining subject to the completion of due diligence, negotiation of definitive documentation and satisfaction of customary closing conditions.

“Consistent with my guidance during our recent earnings call, we are moving forward quickly to implement our strategic plan, which focuses on improving our capital, liquidity and loan-to-deposit metrics,” NYCB President and CEO Joseph Otting said about the sale. “The mortgage team at Flagstar built a first-class warehouse business, which is reflected in our ability to execute on an accretive transaction with JP Morgan.

“The mortgage business remains an important business for the company and we will continue to provide our mortgage customers and partners the same great service that they have come to expect from Flagstar.”

NYCB stated it expects the transaction will add 65 basis points to the Common Equity Tier 1 (CET1) ratio, which is a measure of a bank’s capital as a percentage of its risk-weighted assets and helps determine a bank’s ability to withstand financial distress. NYCB explained this should bolster its liquidity profile, as the proceeds of the sale will be reinvested into cash and securities.