Pub. 2 2012-2013 Issue 1

8 O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S FEATURE ARTICLE “Given the current distressed real estate market, it may be beneficial to hold on to OREO and rent out such properties in certain circumstances.” Fed Issues Policy Statement on Rental of Other Real Estate Owned T he Federal Reserve Bank recently issued a policy statement emphasizing its regulations and policies on the rental of other real estate owned (OREO) by banking organizations. hese regulations and policies permit the rental of OREO to third-party tenants as part of an or- derly disposition strategy within statutory and regulatory limits. Due to higher rental property demand in certain areas, more banking orga- nizations may elect to rent properties as part of a disposition strategy. The decision to rent could depend on property condition, local rental market conditions and the capacity to engage in rental activity in a safe and sound manner. The Policy The Fed’s general policy is that banking organizations should make good faith efforts to dispose of OREO at the earliest feasible date. Banking organizations may rent proper- ties without having to demonstrate continuous active marketing of a property. The rental of properties must be within statutory limits and must follow appropriate policies and proce- dures. To the extent OREO rental properties meet the definition of community development under Community Reinvestment Act (CRA) regulations, they would receive favorable CRA consideration. Banking organizations renting OREO properties are expected to comply with federal, state and local statutes and regulations. Compliance The amount of documentation and plan- ning regulators expect to be generated will depend on the volume of OREO available for rent. All banking organizations should have an operational framework for rental activities pro- portionate to the extent OREO properties are rented. Banking organizations should adhere BRIAN MISCHEL CPA BKD, LLP