Banking Regulator Clarifies Real Estate Valuation and Leasing Guidelines
The Georgia Department of Banking and Finance has recently issued new guidelines to clarify the valuation and leasing of real estate by banks in the state.
New Guidelines for Property Valuation
The new rules aim to ensure that the valuation of bank-owned properties remains accurate and up-to-date. Key changes include:
- Appraisal Frequency: Banks will no longer be allowed to use an initial appraisal or evaluation as the sole basis for determining the value of a property. Instead, appraisals or evaluations must be conducted at intervals of not more than five years.
- Property Value Determination: Property values must be determined by independent appraisers or evaluators.
- Carrying Value Adjustments: Any adjustments to carrying value must be based on changes in fair market value.
Additional Requirements for Bank-Owned Properties
The guidelines also require banks to provide detailed information when requesting permission to hold assets acquired through foreclosure or in lieu of foreclosure, including:
- Statement of Efforts: A statement on efforts made to dispose of the asset
- Reasons for Failure to Sell: Reasons for failure to sell the property
- Plans for Disposal: Plans for disposal of the property
- Estimated Annual Costs and Income: Estimated annual costs and income from the property
Leasing Guidelines for Banks
The Department has also clarified the rules governing leasing of real estate by banks, including:
- Occupancy Requirement: Banks must occupy or intend to occupy the property primarily for the transaction of their business or the business of an affiliate or subsidiary.
- Speculative Acquisition Prohibition: Speculative acquisition of real estate is prohibited.
- Written Approval Required: Written approval from the Department is required before leasing to third parties.
Effective Date and Purpose
The new guidelines are intended to promote safe and sound banking practices in Georgia, and will take effect immediately.