OCC Bulletin 2001-15| March 26, 2001
Loans Held for Sale: Guidance
Chief Executive Officers of National Banks, Department and Division Heads, and All Examining Personnel
The guidance attached to this bulletin continues to apply to federal savings associations.
The Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation, the Federal Reserve Board, the Office of Thrift Supervision and the National Credit Union Administration ("the agencies") have jointly issued the attached "Interagency Guidance on Certain Loans Held for Sale." This issuance covers the accounting and reporting treatment for certain loans that are sold directly from the loan portfolio or transferred to a held-for-sale account.
The Interagency Guidance is directed towards loans that have declined in credit quality and applies when
- An institution decides to sell loans that were not originated or otherwise acquired with the intent to sell, and
- The fair value of those loans has declined for any reason other than a change in the general market level of interest or foreign exchange rates.
Selling loans has become an increasingly important risk management tool for institutions seeking to manage concentrations, change risk profiles, improve returns, and generate liquidity. The agencies encourage the use of this risk management tool. Examiners, however, have noted differences among institutions in the accounting for and reporting of these transactions. Specifically, accounting inconsistencies relate to how and where initial and subsequent fair value adjustments are recorded and the reporting of past due and nonaccrual loans that have been designated as held for sale.
The Interagency Guidance clarifies existing instructions and promotes accounting transparency consistent with generally accepted accounting principles (GAAP).
The Securities and Exchange Commission said in the attached letter to the agencies that it had reviewed the Interagency Guidance and determined that the guidance will assist in promoting consistent accounting and reporting treatment for the loan sales and transfers of loans to held-for-sale accounts that are within the scope of the agencies' guidance.
For further information, please contact Lou Ann Francis, national bank examiner, Office of the Chief Accountant, (202) 649-6280.
Emory W. Rushton
Senior Deputy Comptroller
Bank Supervision Policy