Other Real Estate Owned (OREO) as Community Development
Sometimes homeowners who have defaulted on their mortgages dig themselves into a hole from which there is no way to keep their property. A bank that takes back property as collateral in satisfaction of a mortgage loan needs to clear the property off its books as quickly as possible because it's a non-earning asset. A bank may donate the property or sell it at a discount to a third-party organization that would use the property for a qualified CRA purpose. For example, a bank could donate a vacant house to a nonprofit organization that would rehabilitate the property and sell it to a low- or moderate-income family for affordable housing. The transfer of such a property, when part of a formal revitalization and stabilization plan, also can help stabilize low- or moderate-income neighborhoods when the nonprofit resells the home to new residents, preventing further neighborhood deterioration. The bank could receive CRA consideration for an in-kind donation that represents the difference between the fair market value (based on a recent, independent appraisal) and the discounted sales price of the property. If the bank donates the property outright the property's fair market value would represent the in-kind donation.
We are faced with a similar question. The article above from the OCC indicates that you could get credit for selling at a discounted price.
Is this going to be another case of subjectivity in regards to the CRA?
I'm looking for more evidence in support of selling properties at a discounted price. If anyone has anything, please post.
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