Cookies are more fun to discuss.
A few steps to consider:
a) Accounting: ensure OREO properties are recorded at market (appraised value less the cost to sell (e.g. broker commissions, legal and title fees, and closing costs)) at acquisition of the OREO property. This becomes the new cost basis. Any loss on the loan must be charged to the allowance at acquisition. After acquisition of the OREO property, it must be recorded at the lower of cost or market (appraised value less the cost to sell). This must be evaluated on an asset by asset basis at least quarterly rather than in total of all OREO properties. Any expense incurred must be recognized immediately in non-interest expense.
b) A new appraisal should be obtained when OREO is acquired and at least annually thereafter to determine fair value to ensure that material changes in market conditions or the physical aspects of the property are recognized.
b) There should be defined roles and segregation of duties between the person managing the OREO properties, accounting, and loan operations.
c) Review to ensure efforts are made to maintain the OREO properties in a marketable condition. This is important not only to improve the ability to obtain the best price for the property, but also minimize liability and reputation risk for breaking local property and fire codes.
d) Confirm the property is insured - this may fall under the bank's general umbrella policy or each property may need its own insurance policy.
e) Confirm property taxes are paid and current.
f) Review "other expenses" and ensure they are supported with documentation and are reasonable and appropriate (e.g. utility bills).