§ 34.86 - OREO expenditures and notification.

§ 34.86 Additional OREO expenditures and notification.

Cross Reference

Link to an amendment published at 84 FR 56375, Oct. 22, 2019.

Cross Reference

The effective date of this amendment was corrected to read January 1, 2020, at 84 FR 64193, Nov. 21, 2019.

(a) Additional expenditures on OREO(a) Operating expenditures. A national bank or Federal savings association may pay operating expenses on OREO, including taxes, insurance, utilities, and maintenance, that are reasonable and consistent with safe and sound banking practices.

(b) Business expenditures. A national bank or Federal savings association may pay expenses for OREO that includes the operation of a business, provided the expenses are:

(1) Reasonably calculated to reduce any shortfall between the property's market value and the recorded investment amount; and

(2) Consistent with safe and sound banking practices.

(c) Additional expenditures. For OREO that is a development or improvement project, a national bank or Federal savings association may make advances to complete the project if the advances are:

(1)

Are reasonably

Reasonably calculated to reduce any shortfall between the

parcel

property's market value and the

bank's

recorded investment amount;

(2)

Are not

Not made for the purpose of speculation in real estate; and

(3)

Are consistent

Consistent with safe and sound banking practices.

(

b

d) Notification procedures for additional expenditures.

(1) A national bank or Federal savings association shall notify the appropriate supervisory office at least 30 days before implementing a development or improvement plan for OREO when the sum of the plan's estimated cost and the bank's or savings association's current recorded investment amount (including any unpaid prior liens on the property) exceeds 10 percent of the bank's

capital and surplus

or savings association's total equity capital on its most recent report of condition. A national bank or Federal savings association need notify the OCC under this paragraph (

b

d)(1) only once.

A national bank need not notify the OCC that the bank intends to re-fit an existing building for new tenants or to make normal repairs and incur maintenance costs to protect the value of the collateral.

(2) The required notification must demonstrate that the additional expenditure is consistent with the conditions and limitations in paragraph (

a

c) of this section.

(3) Unless informed otherwise, the national bank or Federal savings association may implement the proposed plan on the thirty-first day (or sooner, if notified by the OCC) following receipt by the OCC of the

bank's

notification, subject to any conditions imposed by the OCC.

[84 FR 56375, Oct. 22, 2019]