Presenters Bull Garber Jr Director of Governmental and External Relations Appraisal Institute Robert L Parson Appraisal Policy Specialist Office of the Comptroller of the Currency OCC Recent releases ID: 693676
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Slide1
What’s New at the OCC: CRE Lending Handbook and Third Party Arrangements
Presenters:
Bull Garber, Jr., Director of Governmental and External Relations, Appraisal Institute
Robert L. Parson, Appraisal Policy Specialist, Office of the Comptroller of the Currency (OCC)Slide2
Recent releases:OCC Comptroller’s Handbook A-CRE: Commercial Real Estate
Lending,
August 2013 OCC Bulletin 2013-29: Third Party Relationships, October 2013
AgendaSlide3
Links the Handbook to OCC Bulletin 2010-42, Interagency Appraisal and Evaluation Guidelines (Guidelines) Reinforces:
Independence of appraisal function in a bank
Selection and engagement of a competent, qualified and independent appraiser
CRE HandbookSlide4
Appropriate communication between bank valuation staff and appraiser
Banks should use written engagement letters
Banks should establish procedures for:
Selecting and approving appraisers
Monitoring appraiser performance
CRE Handbook - ReinforcesSlide5
Reviews:Determine whether methods, assumptions, and value conclusions are reasonable
Sufficiency of
information
and
analysis
Reviewers to possess the requisite:
Education
Expertise
Competence
CRE HandbookSlide6
Rescinds 2001-47“The Office of the Comptroller of the Currency (OCC) expects a bank to practice effective risk management regardless of whether the bank performs the activity internally or through a third party. A bank’s use of third parties
does not diminish the responsibility
of its board of directors and senior management to ensure that the activity is performed in a safe and sound manner and in compliance with applicable
laws.
Third
Party
Relationships – 2013-29Slide7
The OCC is concerned that the quality of risk management over third-party relationships may not be keeping pace with the level of risk and complexity of these relationships. The OCC has identified instances in which bank management has:failed to properly assess and understand the risks and direct and indirect costs involved in third-party relationships.
Third Party RelationshipsSlide8
failed to perform adequate due diligence and ongoing monitoring of third-party relationships. entered into contracts without assessing the adequacy of a third party’s risk management practices. entered into contracts that incentivize a third party to take risks that are detrimental to the bank or its customers, in order to maximize the third party’s revenues.
engaged in informal third-party relationships without contracts in place.
Third Party RelationshipsSlide9
Operational Risk:Entire Appraisal ProgramReputational Risk“agent”High profile failures:
AppraiserLoft
JVI SolutionsES Appraisal Services
Third Party RelationshipsSlide10
All AMCs are not alikeAn applicable quote:“Not everything that can be counted counts and not everything that counts can be counted”
William Bruce Cameron – 1963
“Don’t believe every quote you find on the internet that is attributed to me”
Albert Einstein -
Third Party RelationshipsSlide11
A primary objective of a bank appraisal program is to assure that the bank receives reliable appraisals (residential and commercial) that are prepared by competent, unbiased, and independent appraisers.To that end, Nothing trumps the selection and engagement process.
Third Party RelationshipsSlide12
Questions?
OCC Horizontal Research Findings