Fifth Third Bancorp has agreed to acquire Mechanics Bank's Fannie Mae loan underwriting and servicing business in a $130 million transaction, marking the Cincinnati-based bank's entry into government-backed multifamily securities.
The deal gives Fifth Third direct access to Fannie Mae and a $1.8 billion servicing portfolio. The company plans to hire Mechanics' team and gain approval to underwrite and close loans.
The Mechanics unit operates under what's known as a Delegated Underwriting and Servicing license. The program allows approved lenders to independently underwrite, close and service multifamily loans on behalf of Fannie Mae, streamlining the lending process and providing direct access to an extensive set of Fannie Mae loan products.
The acquisition represents Fifth Third's fastest path to enter the program, though Fannie Mae must still approve the transaction. The bank stands to gain immediate scale in apartments — the nation's largest commercial real estate asset class — while Mechanics exits the business following its September purchase of HomeStreet Bank.
Before Mechanics acquired HomeStreet, the Walnut Creek, California-based bank did not participate in the Fannie Mae program. HomeStreet originated all the multifamily loans under the securitization program that Mechanics is now selling to Fifth Third.
Federal regulators increased multifamily loan purchase caps for Fannie Mae and Freddie Mac by $15 billion each for 2026, signaling expectations for a robust recovery in apartment lending after two years of subdued activity.
Fifth Third does not currently underwrite Freddie Mac loans, and doing so would require a separate license. Neither Mechanics nor HomeStreet underwrote Freddie Mac loans. Fifth Third declined to comment to CoStar News on whether it would pursue that opportunity.
"This acquisition strengthens Fifth Third's leadership in commercial real estate finance and expands our ability to serve multifamily developers and investors with competitive, permanent financing solutions," John Hein, head of commercial real estate at Fifth Third, said in a statement.
Fifth Third held less than $1 billion in multifamily loans at the end of September, according to Federal Deposit Insurance Corp. data. Mechanics Bank held $5.3 billion, with half of that amount coming from its merger with HomeStreet.
Fannie Mae had securitized $138.4 million in multifamily loans from HomeStreet and Mechanics through November, up from $112.1 million in all of 2024 originated by HomeStreet.
Fifth Third is paying about $130 million for the purchase, according to a Mechanics Bank filing with the Securities and Exchange Commission. The price may adjust based on the fair market value of mortgage servicing rights at closing.
The parties expect to close the sale in the first quarter.