Missouri Code of State Regulations
Title 20 - DEPARTMENT OF COMMERCE AND INSURANCE
Division 1140 - Division of Finance
Chapter 2 - Banks and Trust Companies
Section 20 CSR 1140-2.070 - Accounting for Other Real Estate

Universal Citation: 20 MO Code of State Regs 1140-2.070

Current through Register Vol. 49, No. 18, September 16, 2024

PURPOSE: This amendment will allow consistent treatment of an asset's valuation over the course of its life on the books of a bank or trust company. Additionally, this amendment provides clarification to stakeholders regarding the relatively recent federal law change. On September 27, 2019, the Federal Deposit Insurance Corporation, the Federal Reserve, and the Office of the Comptroller of the Currency jointly issued an amended rule that increased the threshold for residential real estate transactions requiring an appraisal from two hundred fifty thousand dollars ($250,000) to four hundred thousand dollars ($400,000). This rule became effective on January 1, 2020.

PURPOSE: This rule requires banks and trust companies to account for other real estate in a manner that conforms to generally accepted accounting principles and sets forth when such real estate must be appraised.

(1) For the purposes of this rule, other real estate shall include real property which is purchased by the bank under judicial or non-judicial foreclosure where the real property was security for debts previously contracted, which is purchased by the bank to protect its interest in debts previously contracted, which is acquired by the bank in partial or complete satisfaction of debts previously contracted, or which is owned by the bank and which has been, but is no longer, used or intended to be used as bank premises.

(2) Other real estate should be booked or accounted for at the lower of-a) the book value of the real estate (or the loan to which it is attributable, plus allowable expenses and less any previous direct write-down unearned interest) or b) the fair market value of the real property at the date of the transfer to that category. Where the other real estate is attributable to debts previously contracted, any excess of the bank's investment in the loan over the fair market value of the real property must be charged against the reserve for loan losses. Additional charge-offs after foreclosure should be charged to other operating expenses. Examiners may classify any portion of the other real estate carried on the bank's books.

(3) At the time real property is transferred to the other real estate category, if the recorded value of the real estate exceeds four hundred thousand dollars ($400,000), the bank shall obtain a current appraisal prepared by an independent qualified appraiser to substantiate the fair market value of the real property; provided that if such property has a recorded value of four hundred thousand dollars ($400,000) or less, an evaluation shall be performed and placed in file.

(A) For purposes of this section, the evaluation must -
1. Be in writing;

2. Be dated;

3. Describe the real estate, its condition, and both current and projected use;

4. List the sources of information;

5. Describe analysis and supporting information;

6. Give an estimate of market value based, as appropriate, on cost and income, and any limiting conditions; and

7. Provide the name, address, and signature of preparer, who must have real estate training or experience, knowledge of the market and have been independent of the loan decision.

(B) For the purposes of this section, the bank will be considered to be in compliance if-
1. The bank has obtained an appraisal or evaluation, as appropriate, within six (6) months prior to acquisition; or

2. Within thirty (30) days after foreclosure, the bank has documented an agreement with an individual or company to perform the appraisal or evaluation, as appropriate; however, the appraisal or evaluation, as appropriate, shall be completed and in the bank's files within ninety (90) days of foreclosure.

*Original authority: 361.105, RSMo 1967 amended 1993, 1994, 1995; 362.105, RSMo 1939, amended 1949, 1963, 1965, 1967, 1977, 1983, 1986, 1990, 1991, 1992, 1995, 2000, 2001; and 362.165, RSMo 1939, amended 1967, 1983, 1995.

Disclaimer: These regulations may not be the most recent version. Missouri may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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