Attachment to SR 12-11 / CA 12-10 

Page 1 of 2 

Examination Procedures 

For Reviewing a Banking Organization's Abandoned Foreclosures Process [Footnote 1 

--

 Before incorporating a review of abandoned foreclosure practices in either a consumer compliance or safety-andsoundness examination, the reviewing examiner should discuss the scope of the review with an examiner from the 

other supervisory area to avoid duplication of effort. End of Footnote 1.] 

July 11, 2012 

General 

Has the supervised organization decided not to complete any foreclosures after the foreclosure 

process was initiated? If yes, continue with examination procedures. 

Safety and Soundness 

1. Review a banking organization's policies and procedures for regular monitoring of 

property values to support the analysis to continue or abandon the foreclosure. 

Collateral valuation information should be sufficient to support a decision to initiate, 

continue, or abandon a foreclosure proceeding. Refer to the Interagency Appraisal 

and Evaluation Guidelines (SR letter 10-16). 

2. Discuss findings with the organization's management and obtain any necessary 

commitment for corrective action. Assess whether these actions will address the 

noted deficiencies and weaknesses and, if not, determine whether supervisory action 

is necessary. 

Consumer Compliance 

1. Review written internal policies and procedures relating to the banking organization's 

decision-making process for discontinuing foreclosures. The policies and procedures 

should address: 

a. A comparison of the option of continuing the foreclosure or abandoning the 

foreclosure, considering the cost and potential recovery in a net present value 

analysis. 

b. Current information on the property's value to support the analysis. 

c. Appropriate management review and oversight of the decision to abandon the 

foreclosure. 

d. Management reporting of loans and properties for which the organization has 

abandoned its right to foreclose. 

e. Internal controls to demonstrate compliance with policies and procedures, 

including governance over policy exceptions. 

f. Responsibilities of internal audit and compliance functions to confirm the 

organization's compliance with laws, regulations, and internal policies related 

to abandoned foreclosures. 

2. Determine whether the organization is adhering to its policies and procedures 

governing its decision to discontinue a foreclosure by reviewing a reasonable sample 

of the organization's loan files and other internal documents. 
Page 2 of 2 

3. Determine whether the organization's consumer inquiry and complaint process 

adequately addresses inquiries on the abandonment of a foreclosure by reviewing a 

reasonable sample of the organization's inquiries and complaints from property 

owners and the files evidencing the organization's investigation and response to 

borrower correspondence, loan files, and inquiries and complaints from property 

owners. 

4. Assess the adequacy of the organization's policies and procedures regarding the 

methods used to notify property owners of its decision to discontinue a foreclosure 

proceeding, including methods used to locate property owners that are no longer 

living in the dwelling. 

5. Assess the adequacy of the organization's policies and procedures regarding the 

methods used to notify local authorities and other relevant parties of its decision to 

discontinue a foreclosure proceeding. Include an assessment of the adequacy of the 

organization's methods to ensure that the organization complies with any 

requirement, as well as state and local laws, to report its decision to discontinue a 

foreclosure proceeding to any local centralized registry system or has made 

reasonable attempts to notify the appropriate governing entity if no property registry 

system exists in the local jurisdiction. 

6. Determine whether the organization's decision-making process for initiating and 

discontinuing a foreclosure proceeding reflects responsible, prudent business 

practices that consider current collateral value information on the property and the 

effect of foreclosure abandonment on property owners, local authorities, and other 

interested parties, and minimizes any potential adverse effects (e.g., fair lending 

concerns) to these parties and the communities where the properties are located. 

7. Determine whether the organization has incorporated its compliance responsibilities 

under the abandoned foreclosure guidance into its operations, particularly with 

respect to its foreclosure notice procedures, and with respect to requiring third-party 

foreclosure service providers to incorporate these compliance activities as well. 

8. Determine whether the organization has conducted training for appropriate personnel 

on the abandoned foreclosure guidance, with particular emphasis on the adverse 

effects (e.g., fair lending concerns) of abandoned foreclosures on property owners, 

local authorities, and neighborhoods. 

9. Determine whether the organization has incorporated routine reviews for compliance 

with the organization's policies and procedures for abandoned foreclosures into its 

compliance monitoring program. 

10. Discuss findings with organization management and obtain any necessary 

commitment for corrective action. Assess whether these actions will address the 

noted deficiencies and weaknesses and, if not, determine whether supervisory action 

is necessary.