FDIC Clarifies Rules for Banks Particularly On Abandoned Foreclosures

by San Antonio Attorney

The Federal Deposit Insurance Corporation has clarified the supervisory expectations for the guidance of risk-management practices.  This is applicable when the bank decides to not continue the proceedings of foreclosure, otherwise known as abandoned foreclosures.

The FDIC cited in the letter that when the banks halt the foreclosure process after it has already commenced, the debtor has already abandoned or even stopped maintaining the property.

This will lead to the accumulation of every bad element in the community.

The letter stated that FDIC continuously encourages each institution in order to avoid foreclosures through a cooperative work among borrowers and considering arrangements at the same time.  This move will encourage the financially stressed debtor to maintain their properties.

The letter also added that the arrangements can be feasible or non-feasible and existing supervisory guidance.  These elements remind institutions that there is an innate need to instill policies and procedures especially when it comes to acquiring other people’s property since this will highly affect the foreclosure process on each surrounding properties.

If one should make a decision in halting the foreclosure process, the companies should also follow policies and procedures, as stipulated by the FDIC’s letter on Wednesday.

  • Procure and utilize the most recent market value data on the affected property and try to use a current valuation especially when trying  to make the decision on initiating, pursuing and abandoning the foreclosure process.
  • Instill any criteria to know when the lien will be officially released because of financial considerations that one can possibly face because of the halted foreclosure process.  In most cases, the institution is liable for any litigation.
  • State and local government will abide with the given applicable state and local laws.  Tax authorities and Code Enforcement Departments should be identified with the abandonment of foreclosure process.

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