Alert July 10, 2012

FRB Issues Supervisory Guidance in the Form of Q&As Regarding Management of Other Real Estate Owned

The FRB issued a Supervision and Regulation letter, SR 12-10, providing a set of questions and answers (“Q&As”) regarding the management of other real estate owned (“OREO”).  The FRB stated that the Q&As, which do not replace prior FRB guidance, are “intended to clarify existing policies and promote prudent practices for the management of an institution’s OREO assets, addressing both safety and soundness policies and consumer compliance issues.”  The Q&As cover six principal types of issues: (1) transferring an asset to OREO; (2) reporting treatment and classification of an OREO asset; (3) appraisals; (4) property management; (5) operational and legal issues; and (6) sale and transfer of OREO assets.