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OCC PROPOSES RULE FOR CREDITWORTHY BORROWERS

 WASHINGTON, May 4 /PRNewswire/ -- National banks will find it easier to sell other real estate owned (OREO) and provide financing for creditworthy borrowers under a proposed rule to appear in the Federal Register tomorrow, the Office of the Comptroller of the Currency (OCC) announced today.
 The proposed rule is part of the president's credit availability program that was announced on March 10. The proposed changes announced today will provide more flexibility to national banks in disposing of OREO and in meeting the credit needs of their communities, including low- and moderate-income borrowers. "These measures will broaden the group of eligible borrowers, benefit national banks, and help stimulate lending to creditworthy loan customers," said Comptroller Eugene A. Ludwig.
 The potential for increased lending from national banks is underscored by the fact that 2,678 banks held over $17 billion in OREO at the end of 1992. The OREO that could be affected most is that portion made up of one to four-family residences, which amounts to $1.6 billion.
 Specifically, the changes proposed today will simplify the treatment of OREO by:
 -- increasing the ways a national bank may dispose of OREO;
 -- removing conflicting OREO accounting guidance from the current regulation;
 -- eliminating inconsistencies in current OREO appraisal requirements; and
 -- incorporating various other statutory changes to the treatment of OREO.
 The proposed rule will allow national banks to finance OREO sales to a larger number of borrowers. It will do this in part by allowing national banks to include a borrower's interest payments in calculating the 10 percent down payment test on a loan to purchase OREO property. In the past, the only part of a loan payment that could count toward the down payment test was the portion applied to principal.
 The proposed rule also will allow national banks to finance OREO loans to borrowers who qualify for loans involving direct or indirect government guarantees. Such loans are guaranteed or insured by the U.S. government, or a U.S. government agency, or are eligible for purchase by an agency such as the Federal National Mortgage Association. Under the existing rules, a national bank cannot dispose of OREO by making a loan with a government guarantee if less than a 10 percent down payment is made.
 The proposed rule will simplify OREO sales by making it possible for a national bank to dispose of OREO when a transaction qualifies for sales treatment under generally accepted accounting principles (GAAP). This will remove an existing conflict between GAAP and the OCC's legal requirements.
 Requirements for appraisals of OREO property will be more flexible under the proposed rule. Appraisals will be subject to general real estate appraisal requirements, rather than the existing OREO rules which require an appraisal to establish fair value when a property becomes OREO. Under the proposed rule, if a valid appraisal exists, no new appraisal will be required when a property becomes OREO.
 Other changes in the proposed rule deal with OREO accounting treatment, holding periods, regulatory notification requirements and expenditures for improvements to OREO property.
 -0- 5/4/93
 /CONTACT: Office of the Comptroller of the Currency, 202-874-4700/


CO: Office of the Comptroller of the Currency ST: District of Columbia IN: FIN SU:

KD-TW -- DC012 -- 4298 05/04/93 11:52 EDT
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Date:May 4, 1993
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