Financing for bank-owned property/OREO

We have a couple properties that we foreclosed on (one is a SFR and one is a vacant lot) and we are now the owners.

We have someone interested in purchashing the property and are considering doing their financing.

Are there certain disclosures that must be provided? Is there anything special we need to know. This is a first for us (believe it or not), so we are clueless.

The FDIC just issued the following FIL on OREO property. I haven't read it yet so not sure of its content.

http://www.fdic.gov/news/news/financial/2008/fil08062.html

This will be a credit sale transaction and your TIL will need the "down-payment" box. See the model form found in Appendix H-10.

Forgive my ignorance, but where do I find Appendix H-10?

Reg. Z. =]

How funny....I was looking in HUDs Reg X - RESPA reg. No wonder I was confused.

I found it...thanks!!!!

Ok...so now I am looking at the model form and I read the part explaining the "Total Sale Price" (see below)

(j) Total sale price. In a credit sale, the total sale price, using that term, and a descriptive explanation (including the amount of any downpayment) such as ``the total price of your purchase on credit, including your downpayment of $----.'' The total sale price is the sum of the cash price, the items described in paragraph (b)(2), and the finance charge disclosed under paragraph (d) of this section.

But...just to make sure I understand....

Let's say we have a lot loan with a balance of $200,000 and we foreclosed on it and found a buyer. Our sales price is $400,000. They aren't making a down payment, so that line is going to say Zero. The Total Sales Price would be $400,000.

Is this right?

Maybe I am over-analyzing it.

Cash price $400,000
Down payment $0.00
Closing fees $5,000
Finance Charges $125,000
Total Sales Price $530,000


Looking at this, it is a little oversimplified. Maybe Richard will see this and give one of his excellent explanations.

Let's say your selling price in the $400,000 with a $100,000 down payment. You are financing $300,000 plus costs.

Loan Amount $300,000
Closing Costs $5,000
Finance Charges $125,000
Down Payment $100,000
Total Sales Price $530,000

Gotcha! Thanks!

As far as your original question, I haven't read the recent FDIC guidance yet either . . . BUT
In general the loan must be on the same terms as you would offer for a non OREO property for the borrower.
IF the loan has no, or little down payment (high LTV without PMI insurance) ; lower than market rate ; etc
THEN you have a loan to facilite the sale of OREO & there are accounting & reporting requirements for the loan after you book it.
You should be able to search "loan to facilitate" and find the details.

We have a residential property that we took in foreclosure that we are trying to sell. The boss said to make an offer to the person who was renting the property at the time of foreclosure a new loan with no closing costs and a below market rate (which we wouldn't normally offer someone, of course). Based on your comments, I am concerned about doing this now. Where's the best place to get information on how we should handle this?

Dredging this back up......my boss wants to do the same. Is there answer for the question? I can't find a thing anywhere.

Go here and then review FAS 66.

http://www.fdic.gov/regulations/safety/manual/section3-6.html

You may want to consult your accounting firm as well. Appendix F of FAS 66 includes a decision tree to help you determine if you can record the OREO financing as a sale and, if so, how you should recognize the gain (if any). If the financing qualifies as an OREO sale, then gain recognition must follow 1 of 4 different methods ... and it gets kind of sticky if you are not familiar with FAS 66.

http://www.fasb.org/pdf/aop_FAS66.pdf