Supervision and Regulation Letters
SR 12-5/CA 12-3
Policy Statement on Rental of Residential Other Real Estate Owned (OREO) Properties
SUPERVISION AND REGULATION
AND COMMUNITY AFFAIRS
|SUBJECT:||Policy Statement on Rental of Residential Other Real Estate Owned (OREO) Properties|
The Federal Reserve is issuing the attached Policy Statement on Rental of Residential OREO Properties (policy statement) to remind banking organizations and examiners that the Federal Reserve's regulations and policies permit the rental of OREO properties as part of an orderly disposition strategy within statutory and regulatory limits.
In light of the current extraordinary conditions in housing markets, the policy statement indicates that banking organizations may rent one- to four-family residential OREO properties without having to demonstrate continuous active marketing of the properties, provided suitable policies and procedures are followed. The policy statement applies to state member banks, bank holding companies, nonbank subsidiaries of bank holding companies, savings and loan holding companies, non-thrift subsidiaries of savings and loan holding companies, and U.S. branches and agencies of foreign banking organizations (collectively, banking organizations).1
The policy statement describes key risk management considerations for banking organizations that engage in the rental of residential OREO, including compliance with holding-period requirements for OREO, compliance with landlord-tenant and associated requirements, and accounting according to generally accepted accounting principles. Rental OREO properties with leases in place and demonstrated cash flow from rental operations sufficient to generate a reasonable rate of return should generally not be classified.
The policy statement also establishes specific supervisory expectations for banking organizations that undertake large-scale residential OREO rentals (generally, 50 properties or more available for rent). Such organizations should have formal policies and procedures governing the operation and administration of OREO rental activities, including property-specific rental plans, policies and procedures for compliance with applicable laws and regulations, a risk management framework, and oversight of third-party property managers.
Federal Reserve Banks are asked to distribute this letter to the banking organizations in their districts, as well as to supervisory and examination staff. For questions related to this guidance, please contact William Treacy, Adviser, Division of Banking Supervision and Regulation, at (202) 452-3859; or Tim Robertson, Senior Supervisory Consumer Financial Services Analyst, Division of Consumer and Community Affairs, at (202) 452-2565. In addition, questions may be sent via the Board's public website.2
Michael S. Gibson
Division of Banking
Supervision and Regulation
Sandra F. Braunstein
Division of Consumer
and Community Affairs
- This policy statement supplements other relevant Federal Reserve guidance, including the Board's policy statement on the disposition of property acquired in satisfaction of debts previously contracted. See 12 CFR 225.140. Return to text
- See http://www.federalreserve.gov/apps/contactus/feedback.aspx. Return to text