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FOR FORECLOSED PROPERTY IN FEDERAL CREDIT PROGRAMS. Foreclosed Property Page 5 of 97 August 2017. The scenarios illustrate beginning, pre-closing, and post-closing trial balances. Where appropriate, the resulting yearend agency reports listed below are shown: • Balance Sheet; • Statement of Net Cost; • Statement of Changes in Net Position;
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Foreclosed property must be classified as Post-1991 property or Pre-1992 property to remain consistent with the provisions of the Credit Reform Act of 1990. Post-1991 property is associated with loans or loan guarantees issued after September 30, 1991 and is valued at its net present value.
As discussed in ASC 310-20-40-3, a creditor should initially record the foreclosed property classified as held for sale at fair value less the estimated costs to sell the property. Fair value should be determined using the measurement guidance in ASC 820-10.
For reporting purposes, as with real property, other foreclosed assets include loans where a bank has received physical possession of a borrower’s assets, regardless of whether formal proceedings take place.
Foreclosure – A legal procedure by which mortgaged real estate property is sold by the lender in full or partial satisfaction of the mortgage debt. For example, if the borrower fails to pay the monthly mortgage payments, the lender takes the property back and sells it to recover some or all of the debt. If
Institutions usually acquire ORE through foreclosure after a borrower defaults on a loan secured by real estate. Most states have laws governing the acquisition and retention of such assets. Examiners should determine whether management establishes appropriate policies and procedures for acquiring, holding, and disposing of ORE.
