Community Investments Vol 24, Issue 1
Dear Dr. CRA,
Like many other banks, we have a large inventory of residential other real estate owned (OREO) properties. I’ve heard that rental demand is increasing in my market – vacancies are down and rents keep going up. Could we rent out our OREO properties as part of our disposition strategy, and if so, would we get CRA credit?
Double Stuffed with OREOs
Dear Double Stuffed,
The Federal Reserve released a policy statement earlier this year confirming that it permits the rental of residential OREO properties as part of an orderly disposition strategy. Banking organizations may rent OREOs (within statutory and regulatory holding-period limits) without having to demonstrate continuous active marketing of the property. As long as certain policies and procedures are followed, banks would not violate supervisory expectations that they show “good-faith efforts” to dispose of OREO by renting the property within an appropriate time frame. However, in order to receive favorable CRA consideration, the OREO rental properties must meet the definition of community development under the CRA regulations (which includes activities that provide affordable housing for low- and moderate-income individuals as well those that revitalize or stabilize areas, see 12 CFR 228.12(g)(1) and (4)).
You can learn more about OREO rentals through the Fed’s April 5, 2012 policy statement, available online
- Landlord-tenant laws;
- Landlord licensing or registration requirements;
- Property maintenance standards;
- Eviction protections (such as under the Protecting Tenants at Foreclosure Act);
- Protections under the Servicemembers Civil Relief Act; and
- Anti-discrimination laws, including the applicable provisions of the Fair Housing Act and the Americans with Disabilities Act.
This is important as a pattern or practice of violations of certain laws can have an adverse impact on the bank’s CRA rating.