Final rule completes update of OREO regs (first in more than 20 years) for savings associations, national banks

A final rule aimed at clarifying and streamlining other real estate owned (OREO) rules for federal savings associations (FSAs) will take effect Dec. 1, according to filings Monday by the federal regulator of national banks and thrifts.

The final rule by the Office of the Comptroller of the Currency (OCC) – proposed last April – provides a regulatory framework for the OREO activities of FSAs that the agency says would be generally consistent with the framework provided by the former Office of Thrift Supervision (OTS). When the rule was proposed, the agency pointed out its last significant revision to national bank OREO rules was more than 20 years ago.

The OCC filed the final rule with the Federal Register Monday; it is scheduled for publication Tuesday.

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

The OCC assumed the responsibilities of the former OTS under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). The OCC has pointed out that FSAs are not subject to statutory provisions governing OREO as are national banks, but that 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 However, the OCC rescinded those documents, creating ambiguity with respect to OREO standards for FSAs.

The final 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.

Other Real Estate Owned and Technical Amendments