FRB Issues QA on Managing OREO Assets On June 28, 2012, the Federal Reserve Board issued a supervision letter containing Questions and Answers directed to bank holding companies, state member banks and savings and loan holding companies addressing issues related to the management of OREO assets. Although not breaking new ground, the Federal Reserve issued this document to reiterate its longstanding guidance and to highlight key concepts on the financial reporting, loss recognition, and management of OREO assets. The Q&A addresses issues that include:
- When to transfer assets to OREO status on call reports, how to value those assets and how to address redemption rights.
- Accounting for foreclosures and valuation changes on call reports.
- Reporting of expenses related to completion of partially constructed projects.
- Appraisals of OREO.
- Ongoing property management, including holding period, use of third party managers, due diligence, and pre-foreclosure maintenance.
- Operational and legal issues.
- Sale and transfer of OREO.
The letter can be found at http://www.federalreserve.gov/bankinforeg/srletters/sr1210.htm.
