Residential Real Estate

Laws and Regulations

Key laws and regulations that pertain to FDIC-supervised institutions; note that other laws and regulations also may apply.

• Appendix A to Part 364 — Interagency Guidelines Establishing Standards for Safety and Soundness provides operational and managerial standards for safety and soundness to include asset quality and asset growth
• Part 365 — Real Estate Lending Standards provides standards for real estate lending and addresses the adoption and maintenance of written policies for extensions of credit that are secured by real estate, or that are made for the purpose of financing permanent improvements to real estate
• Part 323 — Appraisals discusses requirements for a written appraisal for certain real estate-related transactions
• Section 337.2 — Standby Letters of Credit discusses the calculation of legal lending limitations, including loans to any one borrower, loans to affiliates of the bank, or aggregate loans
• Section 337.3 and Federal Reserve Board Regulation O address extensions of credit from an institution to its executive officers, directors, and principal shareholders
• Part 347 — International Banking discusses requirements for institutions to engage in foreign financial activities
• Federal Reserve Board Regulation W restricts certain transactions between banks and their affiliates

Supervisory Resources

Frequently asked questions, advisories, statements of policy, and other information issued by the FDIC alone, or on an interagency basis, provided to promote safe-and-sound operations.

• Risk Management Manual of Examination Policies
  • Section 3.1 — Asset Quality describes areas of consideration for assigning the asset quality rating and defines each rating
  • Section 3.2 — Loans describes the review process for evaluating lending policies and credit administration practices, as well as their effectiveness to maintain loan quality and minimize loss
  • Section 3.8 — Off-balance Sheet Activities describes the review process for items such as loan commitments, letters of credit, and revolving facilities
• The Uniform Retail Credit Classification and Account Management Policy establishes standards to measure retail credit quality based on the repayment performance of individual borrowers
• FDIC Advisory on Effective Risk Management Practices for Purchased Loans and Purchased Loan Participations discusses the importance of underwriting and administering loan purchases and participations as if they were being directly originated by the purchasing institution
• Supervisory Approach for Qualified and Non-Qualified Mortgage Loans clarifies safety-and-soundness and CRA considerations for institutions engaged in mortgage lending in light of the Ability-to-Repay and Qualified Mortgage Standards Rule
• Classification Treatment for High LTV Residential Refinance Loans establishes that retail loan classifications should be based on the borrower’s payment performance, not the value of collateral, which can rise and fall as market conditions change
• Interagency Guidance on High LTV Residential Real Estate Lending addresses some of the inherent risks and controls expected for the type of lending
• Frequently Asked Questions on Residential Tract Development Lending address appraisal and real estate lending requirements for residential tract developments
• Interagency Advisory on Mortgage Banking highlights concerns and provides guidance regarding mortgage-banking activities, primarily in the valuation and hedging of mortgage servicing assets
• Home Equity
  • Interagency Guidance on Home Equity Lines of Credit (HELOCs) Nearing Their End-of-Draw Period provides a framework for working with borrowers experiencing financial difficulties
  • Consumer Protection and Risk Management Considerations When Reducing or Suspending HELOCS and Suggested Best Practices for Working with Borrowers reminds financial institutions that certain legal requirements designed to protect consumers must be followed
  • Credit Risk Management Guidance for Home Equity Lending and Addendum address risks associated with open-end home equity lines of credit and closed-end home equity loans
  • Interagency Statement on Meeting the Needs of Creditworthy Borrowers provides a supervisory perspective on providing credit to businesses, consumers, and other creditworthy borrowers
• Subprime and Nontraditional
  • Interagency Statement on Subprime Mortgage Lending addresses issues relating to certain adjustable-rate mortgage products that can cause payment shock
  • Guidance on Nontraditional Mortgage Product Risks clarifies how to offer these products in a safe-and-sound manner, and in a way that clearly discloses the risks that borrowers may assume
  • Interagency Guidance on Subprime Lending identifies risks inherent in the activity and a need for board-approved policies and procedures, as well as internal controls to manage these risks
  • Expanded Guidance for Subprime Lending Programs addresses the elevated levels of credit and other risks from these activities that require more intensive risk management oversight and, often, additional capital
• Working with Borrowers
  • Discontinuation of Foreclosure Proceedings addresses policies and practices regarding decisions to discontinue the foreclosure process
  • Protecting Tenants at Foreclosure Act provides protections for tenants, including those in Section 8 housing, who are living in homes subject to foreclosure
  • Guidance Addressing Certain Issues Related to Troubled Debt Restructurings provides insight into the accounting treatment and regulatory credit risk grade or classification of commercial and residential real estate loans that have undergone troubled debt restructurings
  • FDIC Foreclosure Prevention Initiative provides help for consumers and the banking industry to avoid unnecessary foreclosures and raise awareness of foreclosure "rescue" scams that promise false hope to consumers at risk of losing their homes
  • Responsible Loss Mitigation Activities addresses servicers’ obligations to lienholders when modifying loans 
  • Illustrations of Consumer Information for Hybrid Adjustable Rate Mortgage Product provides important facts about adjustable rate mortgages with a reduced initial interest rate
  • Interagency Statement on Meeting the Needs of Creditworthy Borrowers provides a supervisory perspective on providing credit to businesses, consumers, and other creditworthy borrowers
  • FDIC's Forum on Mortgage Lending for Low- and Moderate-Income Households examines ways to encourage profitable, responsible and sustainable mortgage lending practices
  • FDIC Statement on Reporting of Securitized Subprime Adjustable Rate Residential Mortgages encourages utilization of the HOPE NOW alliance's loan modification and loss mitigation reporting standards
  • Servicing for Mortgage Loans, Supplemental Information for Loss Mitigation Strategies encourages servicers to consider the borrower’s ability to repay modified obligations, taking into account the debt-to-income ratio
  • Statement on Loss Mitigation Strategies for Servicers of Residential Mortgages encourages strategies while preserving homeownership to the extent possible and appropriate
  • Statement on Working with Mortgage Borrowers encourages financial institutions to work constructively with borrowers who are financially unable to meet their contractual payment obligations
• Mortgage Lending Resources for Compliance Officers
• Community Reinvestment Act (CRA) Resources

Other Resources

Supplemental information related to safe-and-sound banking operations.

• FDIC's Supervisory Insights — Winter 2011 article, “Navigating the Real Estate Valuation Process”