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What’s New at the OCC: CRE Lending Handbook and Third Party Arrangements What’s New at the OCC: CRE Lending Handbook and Third Party Arrangements

What’s New at the OCC: CRE Lending Handbook and Third Party Arrangements - PowerPoint Presentation

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Uploaded On 2018-10-22

What’s New at the OCC: CRE Lending Handbook and Third Party Arrangements - PPT Presentation

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

relationships party bank occ party relationships occ bank appraisal handbook cre management risk 2013 contracts engagement appraiser competent activity

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Presentation Transcript

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