Fair Lending and Other Real Estate Owned (OREO) If the worst-case scenario occurs and the institution must manage Other Real Estate Owned (OREO), are Fair Lending concerns over? Wrong! Examination manuals clearly instruct examiners to look for potential Fair Lending concerns within OREO practices by reviewing statistics on foreclosures and deeds in lieu of foreclosure. They also direct examiners to assess any disparities between groups of individuals in the maintenance, marketing and disposition of OREO properties. For example, do disparities appear in property maintenance tied to the race or ethnicity of the neighborhood? If so, this could constitute a Fair Housing violation. Collection procedures should also describe how OREO properties will be maintained and marketed. Be specific about the type of maintenance, repairs or renovations to be performed, and identify who is responsible for making those decisions. To avoid Fair Lending issues, ensure all OREO properties are maintained equally, regardless of the demographic characteristics of the neighborhood. Examples of potential disparities: • OREO lawns in non-Hispanic neighborhoods are mowed regularly, while those in Hispanic neighborhoods are neglected. • Debris removal or utility maintenance is performed consistently in some areas but not others. Such inconsistencies may suggest discriminatory practices. Integrating Fair Lending into the Collection Framework If the institution hasn’t already documented its collection and OREO processes within its Fair Lending Risk Assessment or collection procedures, now is the time to enhance those documents and provide greater clarity. In the end, ensure your financial institution can demonstrate that its procedures support Fair Lending compliance throughout the entire lending process — including debt collection and the management and disposition of property taken in the collection of debt. Promote consistency in procedures so that the same options are offered to all borrowers. NEBRASKA INDEPENDENT BANKER 21
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