Washington Federal Bank is selling 2,000 multifamily loans with a current unpaid principal balance of $3.2 billion to Bank of America for about $2.9 billion in a bid by the regional lender to scale down its exposure to the commercial real estate sector, according to a regulatory filing by parent company WaFd.

Once the deal is closed, Bank of America plans to enter into a structured transaction or loan sale with one or more funds of Pacific Investment Management, according to the filing.

Regional banks have been under increased scrutiny by regulatory authorities worried about their exposure to troubled commercial real estate loans. In particular, the Federal Reserve has categorized multifamily with office as being the more concerning areas of CRE markets. Another distressing data point for the sector: multifamily showed the biggest transaction decline, at 50%, by the end of 2023, according to MSCI.