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OCC proposes update of ‘other real estate owned’ rules for national banks, savings associations

April 24, 2019 / Source: Regulatory Report

OCC proposes update of ‘other real estate owned’ rules for national banks, savings associations

April 23, 2019 OCC 0

A proposal to clarify and streamline the regulation of banks’ other real estate owned (OREO) activities and update the OREO regulatory framework for federal savings associations (FSA) is being issued by the Office of the Comptroller of the Currency (OCC) for a 60-day comment period.

The proposed rule, slated for publication in Wednesday’s Federal Register, would provide a regulatory framework for the OREO activities of FSAs that the OCC says would be generally consistent with the framework provided by the former Office of Thrift Supervision (OTS). The agency also notes its last significant revision to national bank OREO rules was more than 20 years ago.

The OCC assumed the the responsibilities of the former OTS under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). It says FSAs are not subject to statutory provisions governing OREO as are national banks, but it says the capital regulations and handbooks issued by the former OTS “generally established requirements and supervisory expectations for OREO activities.” However, the OCC rescinded those documents, creating ambiguity with respect to OREO standards for FSA.

The OCC says its proposed framework for FSAs is generally consistent with the one used by the OTS. “This framework is still followed by many savings associations and would offer flexibility consistent with provisions in the Home Owners’ Loan Act (HOLA),” it said. Some of the provisions of the proposed rule set similar requirements for national banks’ and FSAs’ OREO holding periods, disposition, appraisals, and expenditures.

Also proposed are the removal of Appendices A and B to 12 CFR part 3 (risk-based capital guidelines for national banks, which included capital provisions which are now outdated), and 12 CFR part 167 (capital requirements for FSAs), as well as conforming technical edits to other parts that reference those provisions.

The proposed rule makes some adjustments in definitions and keeps an initial five-year holding period for OREO (and allows for a potential additional, subsequent five-year holding period). It also addresses methods for the disposition of OREO, applicable appraisal requirements, expenditures on OREO and requirements for prior notification of significant additional expenditures, and makes other technical amendments.