Acquisition opens door to Fannie Mae government-backed securities lending
Fifth Third Bancorp has reached an agreement to purchase Mechanics Bank’s Fannie Mae loan underwriting and servicing operation in a transaction valued at approximately $130 million, allowing the Cincinnati-based lender to enter the government-backed multifamily securities market.
Through the acquisition, Fifth Third will gain direct access to Fannie Mae along with a $1.8 billion loan servicing portfolio. The bank also plans to bring over the Mechanics team and seek approval to underwrite and close multifamily loans under the program.
The business operates under a Delegated Underwriting and Servicing, or DUS, license. This structure enables approved lenders to independently underwrite, close and service multifamily loans on Fannie Mae’s behalf, offering borrowers streamlined access to a wide range of agency-backed financing options.
The transaction provides Fifth Third with its quickest entry into the DUS program, though final approval from Fannie Mae is still required. The move immediately gives the bank scale in the apartment sector, the largest segment of U.S. commercial real estate. Mechanics Bank, meanwhile, is exiting the business following its acquisition of HomeStreet Bank in September.
Prior to acquiring HomeStreet, Mechanics did not participate in the Fannie Mae multifamily program. HomeStreet originated all of the loans under the securitization platform that are now being sold to Fifth Third.
The deal comes as federal regulators raised multifamily loan purchase caps for Fannie Mae and Freddie Mac by $15 billion each for 2026, signaling expectations of a rebound in apartment lending after two years of slower activity.
Fifth Third does not currently originate Freddie Mac loans, which would require a separate license. Neither Mechanics nor HomeStreet participated in Freddie Mac lending. Fifth Third declined to comment on whether it plans to pursue that channel, according to CoStar News.
“This acquisition enhances Fifth Third’s position in commercial real estate finance and broadens our ability to support multifamily developers and investors with competitive long-term financing,” said John Hein, head of commercial real estate at Fifth Third, in a statement.
At the end of September, Fifth Third held less than $1 billion in multifamily loans, based on Federal Deposit Insurance Corp. data. Mechanics Bank reported $5.3 billion in multifamily exposure, about half of which resulted from its merger with HomeStreet.
Through November, Fannie Mae had securitized $138.4 million in multifamily loans originated by HomeStreet and Mechanics, compared with $112.1 million for all of 2024.
According to a Mechanics Bank filing with the Securities and Exchange Commission, Fifth Third is paying roughly $130 million for the business. The final purchase price may be adjusted based on the fair market value of mortgage servicing rights at closing.
The transaction is expected to close during the first quarter.
Source: Original reporting by Mark Heschmeyer, CoStar News.
