I was informed that in order for banks to maintain their FDIC insurance, they must place $8.00 to every $1.00 of a loan amount on a property in a reserve account at the time the notice of default letter is sent out. From that date the bank has 24 months to sell the property or the government takes either all of the reserve or a large portion. Is this true? What is the FDIC code or regulation number for this? And what % of the reserve account does the government take?
I have never heard of this. Property that a bank loans against is not reserved for the FDIC. The bank sets aside loan reserves called an Allowance for Loan and Lease Loss (ALLL) internally and the reserved amount varies based on the quality of the loan. If the property is foreclosed upon, the bank sells it according to their state laws. They may often be the buyer at that foreclosure sale. This then makes that property Other Real Estate Owned (OREO). There are specific requirements from the regulators on what must be done with OREO and timelines under which they must do it. Again, reserves held with the FDIC is not a part of this.
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I have never heard of this. Property that a bank loans against is not reserved for the FDIC. The bank sets aside loan reserves called an Allowance for Loan and Lease Loss (ALLL) internally and the reserved amount varies based on the quality of the loan. If the property is foreclosed upon, the bank sells it according to their state laws. They may often be the buyer at that foreclosure sale. This then makes that property Other Real Estate Owned (OREO). There are specific requirements from the regulators on what must be done with OREO and timelines under which they must do it. Again, reserves held with the FDIC is not a part of this.
