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August 31, 2018

OCC issued the updated “Other Real Estate Owned” (OREO) booklet of the Comptroller’s Handbook. The Handbook provides guidance to examiners on banks’ acquisition, reporting, management, and disposition of OREO. The updated booklet includes accounting changes for foreclosed property under contract, in accordance with the FASB Accounting Standards Codification Subtopic 360-20, Subtopic 610-20, and Topic 606.

The updated booklet replaces the booklet of the same title issued in September 2013. Also replaced is OCC Bulletin 2013-20, “Other Real Estate Owned: Comptroller’s Handbook Revisions and Rescissions.” Additionally, the updated booklet:

  • Details changes to the accounting for sales of OREO by public business entities. The changes became effective for fiscal years beginning after December 15, 2017, including interim reporting periods within those fiscal years.
  • Details changes to the accounting for sales of OREO by non-public business entities. The changes become effective for fiscal years beginning after December 15, 2018 and interim reporting periods within fiscal years beginning after December 15, 2019.
  • Provides interim guidance on the OREO holding period for federal savings associations (FSAs) as a result of the integration of FSAs into 12 CFR 3.
  • Includes clarifications about supervisory guidance, sound risk management practices, and legal language.
  • Clarifies the roles of a bank’s board of directors and management.
  • Reflects the integration of FSAs into 12 CFR 7, subpart A, and 12 CFR 34, subpart C.
  • References third-party risk management guidance issued since the booklet’s last publication.

OREO is real estate, including capitalized and operating leases, that is acquired through any means in full or partial satisfaction of a debt previously contracted and that is a former banking facility including a property that was acquired for future expansion, but for which banking use is no longer contemplated. For regulatory reporting purposes, OREO includes equity holdings, such as limited liability companies, that indirectly represent real estate acquired through foreclosure or by deed in lieu of foreclosure and the real estate collateral securing a loan when the bank has obtained physical possession of the collateral, regardless of whether formal proceedings have been instituted against the borrower. It also includes foreclosed real estate sold under contract and accounted for under the deposit accounting method in accordance with the FASB Accounting Standards Codification (ASC) 360-20-40, “Property, Plant, and Equipment – Real Estate Sales,” or accounted for under ASC Subtopic 610-20, “Other Income – Gains and Losses From the Derecognition of Nonfinancial Assets,” when the transaction does not meet the requirements of ASC Topic 606, “Revenue From Contracts With Customers.”

 

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Keywords: Americas, US, Banking, Accounting, Comptroller Handbook, Real Estate, Reporting, FASB, OCC

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