The Comptroller of the Currency is advising banks to review their foreclosure policies and procedures, urging them to address the risks associated with taking possession of homes, acquiring the properties and becoming the actual owner.
"Foreclosures on residential properties are occurring in unprecedented numbers and are projected to continue this trend in the near term," according to a new OCC bulletin to national banks and federal savings associations.
The six-page bulletin reminds depositories that under federal law they must provide renters with 90-days notice before evicting them from a foreclosed property.
Servicing banks also have to comply with local requirements to register foreclosed or vacant properties.
In cases where the cost of foreclosure exceeds the value of the property, "lenders may release a lien securing a defaulted loan rather than foreclose on the residential property," the Dec. 14 bulletin says.
The bank should notify the borrower, even if they have abandoned the property. Local authorities should be contacted as well.
The bulletin says the borrower may continue to occupy the property. However, the borrower is obligated to maintain the property, "pay property taxes and the debt owed,” the OCC writes.
