This paper investigates the mortgage lending of banks operating in multiple metropolitan areas of the U.S. during the housing market collapse of 2007-2009. Some regions of the U.S. suffered much larger declines in house prices and increases in mortgage delinquencies than others. We use this regional variation to identify whether losses in high-delinquency markets affected multimarket banks’ lending in lower-delinquency markets. Our results show that multi-market banks reduced their mortgage lending in lower-delinquency markets in response to these losses, consistent with the view that local shocks to bank capital can have a spillover effect on other regions through banks’ internal capital markets. Interestingly, this effect is greatest in highly peripheral markets where multi-market banks originate a very small share of their total mortgage loans. We find that securitized lending may have somewhat mitigated the decline in portfolio lending, but that the effect on total lending is still economically significant. These findings point to greater contagion of local economic shocks due to the geographic diversification of multimarket banks.