OCC provides foreclosure guidance
The Office of the Controller of the Currency (OCC) has issued Bulletin 2011-49 — Guidance on Potential Issues With Foreclosed Residential Properties. The guidance outlines a bank’s obligations and risks related to foreclosed residential property (although it states that many principles also apply to commercial properties).
The guidance reviews legal, safety and soundness, and community impact considerations, noting that a bank’s obligations may differ depending on whether the bank acts as owner of the foreclosed property, is the servicer or property manager, or is the securitization trustee. It also emphasizes the importance of understanding the requirements that Fannie Mae, Freddie Mac and HUD impose on servicers. The OCC expects banks to develop and implement “robust policies and procedures . . . to address risks associated with foreclosed (or soon to be foreclosed) properties.”
FDIC scrutinizing bank insurance policies
FDIC examiners have been taking a closer look at banks’ insurance policies. Insurance policies that provide directors and officers with coverage for certain civil monetary penalties (CMPs) may violate an FDIC rule against “prohibited indemnification payments.”
Traditionally, banks have avoided this harsh result by purchasing separate CMP endorsements and having directors and officers pay the premiums. But according to anecdotal reports, some examiners maintain that policies issued in a bank’s name violate the rule regardless of who pays the premiums.
If examiners challenge your bank’s insurance arrangements, talk to your advisors about potential alternatives, such as having directors and officers purchase standalone policies.
FAQs on interest rate risk
The Federal Financial Institutions Examination Council recently issued FAQs on interest rate risk (IRR) management that were jointly adopted by the various federal banking agencies. The FAQs address IRR exposure measurement and reporting, model risk management, stress testing, assumption development, and model and systems validation. They emphasize, however, that a particular bank’s IRR management processes should be designed in the context of its complexity, risk profile, business model and scope of operations.
CFPB proposes model mortgage statement
The Consumer Financial Protection Bureau (CFPB) is seeking comments on a prototype monthly mortgage statement. The Dodd-Frank act requires banks to provide borrowers with monthly statements that contain specified information about their loans. It also requires the CFPB to develop a model statement.
This summer, once the CFPB has a “polished” prototype, it plans to issue a proposed rule that specifies the information required in monthly mortgage statements and includes a model statement. According to the Bureau, banks will have some flexibility to tailor the model form to meet their needs.
You can download the prototype at http://www.consumerfinance.gov/wp-content/uploads/2012/02/20120213_cfpb_draft-periodic-mortgage-statement.pdf.
Jodi Houston is a Manager Accountant with Clark Schaefer Hackett and can be reached a [email protected].