The OCC corrected a final rule designed to (i) streamline regulations for national banks and (ii) update the regulatory framework for federal savings associations on "other real estate owned" ("OREO") activities. Specifically, the OCC provided additional regulatory analyses that correct and supplement the prior November 21st publication.

As previously described, OREO activities by federal savings associations are guided by capital regulations and handbooks issued by the Office of Thrift Supervision ("OTS"). Pursuant to the final rule, the OCC will:

  • revise the definition of "debts previously contracted" real estate to "refer to leased real estate";

  • modify the definition of "former banking premises" to include a reference to OCC Rule 7.1000(a)(2), which allows national banks and federal savings associations to own real estate for use in their own banking activities;

  • devise a maximum "initial holding period" of five years for federal savings associations to "ensure the safe and sound management of OREO holdings";

  • adopt, for federal savings associations, the current national bank provisions stating the date on which the holding period for OREO starts (generally, the date on which the property is transferred to the bank or savings association);

  • clarify that when a national bank or federal savings association procures OREO from a merged or acquired institution, the relevant holding period will start on the effective date of the merger or acquisition;

  • permit the disposition of OREO as approved by the OCC; and

  • recognize that a federal savings association, unlike a national bank, may "transfer OREO to a service corporation."

The final rule will become effective on January 1, 2020.