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BOARD OF GOVERNORS

OF THE

FEDERAL RESERVE SYSTEM

WASHINGTON, D.C. 20551

DIVISION OF BANKING

SUPERVISION AND REGULATION

DIVISION OF CONSUMER AND

COMMUNITY AFFAIRS

SR 12-5

CA 12-3

April 5, 2012

Revised June 25, 2018

TO THE OFFICER IN CHARGE OF SUPERVISION AT EACH FEDERAL RESERVE 

BANK AND TO EACH BANKING ORGANIZATION SUPERVISED BY THE 

FEDERAL RESERVE

SUBJECT: Policy Statement on Rental of Residential Other Real Estate Owned (OREO)

Properties

Applicability to Community Banking Organizations: While this guidance applies to all 

institutions supervised by the Federal Reserve, the statement is particularly relevant to large 

banking organizations with significant portfolios of residential OREO properties.

The Federal Reserve is issuing the attached Policy Statement on Rental of Residential 

OREO Properties (policy statement) to remind banking organizations and examiners that the 

Federal Reserve’s regulations and policies permit the rental of OREO properties as part of an 

orderly disposition strategy within statutory and regulatory limits. 

In light of the current extraordinary conditions in housing markets, the policy statement 

indicates that banking organizations may rent one- to four-family residential OREO properties 

without having to demonstrate continuous active marketing of the properties, provided suitable 

policies and procedures are followed. The policy statement applies to state member banks, bank 

holding companies, nonbank subsidiaries of bank holding companies, savings and loan holding 

companies, non-thrift subsidiaries of savings and loan holding companies, and U.S. branches and 

agencies of foreign banking organizations (collectively, banking organizations).1

The policy statement describes key risk management considerations for banking 

organizations that engage in the rental of residential OREO, including compliance with holdingperiod requirements for OREO, compliance with landlord-tenant and associated requirements, 

 1

 This policy statement supplements other relevant Federal Reserve guidance, including the Board’s policy 

statement on the disposition of property acquired in satisfaction of debts previously contracted. 

See 12 CFR 225.140.

Clarification as of June 25, 2018: As reflected in CA 18-4, 

which supersedes CA 15-4, the Protecting Tenants at Foreclosure 

Act of 2009 (PTFA) – which had expired on December 31, 2014 

– was restored effective June 23, 2018. Accordingly, the PTFA 

is once again an applicable federal law for purposes of this letter 

and policy statement.
 

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and accounting according to generally accepted accounting principles. Rental OREO properties 

with leases in place and demonstrated cash flow from rental operations sufficient to generate a 

reasonable rate of return should generally not be classified. 

The policy statement also establishes specific supervisory expectations for banking 

organizations that undertake large-scale residential OREO rentals (generally, 50 properties or 

more available for rent). Such organizations should have formal policies and procedures 

governing the operation and administration of OREO rental activities, including propertyspecific rental plans, policies and procedures for compliance with applicable laws and 

regulations, a risk management framework, and oversight of third-party property managers.

Federal Reserve Banks are asked to distribute this letter to the banking organizations in 

their districts, as well as to supervisory and examination staff. For questions related to this 

guidance, please contact William Treacy, Adviser, Division of Banking Supervision and 

Regulation, at (202) 452-3859; or Tim Robertson, Senior Supervisory Consumer Financial 

Services Analyst, Division of Consumer and Community Affairs, at (202) 452-2565. In 

addition, questions may be sent via the Board’s public website.2

Michael S. Gibson

Director

Division of Banking Supervision

and Regulation

Sandra F. Braunstein

Director

Division of Consumer

and Community Affairs

Attachment:

• Federal Reserve Policy Statement on Rental of Residential Other Real Estate Owned

Properties

Cross References to:

• SR letter 10-16, “Interagency Appraisal and Evaluation Guidelines”

• SR letter 00-17, “Guidance on the Risk Management of Outsourced Technology

Services”

• SR letter 95-16, “Real Estate Appraisal Requirements for Other Real Estate Owned 

(OREO)”

• CA letter 09-5, “Information and Examination Procedures for the ‘Protecting Tenants at 

Foreclosure Act of 2009”

• CA letter 05-3, “Servicemembers Civil Relief Act of 2003” 

 2 See http://www.federalreserve.gov/apps/contactus/feedback.aspx.