Residential Real Estate Lending

The Office of the Comptroller of the Currency's (OCC) Comptroller's Handbook booklet, "Residential Real Estate Lending," is prepared for use by OCC examiners in connection with their examination and supervision of national banks and federal savings associations (collectively, banks). Each bank is different and may present specific issues. Accordingly, examiners should apply the information in this booklet consistent with each bank's individual circumstances. When it is necessary to distinguish between them, national banks and federal savings associations (FSA) are referred to separately. For the purposes of this booklet, residential real estate (RRE) lending comprises loans for purchasing RRE (properties designed to house one-to-four families), refinancing loans used to purchase RRE, and extending closed-end loans or open-end lines of credit secured by the borrower's equity in RRE. RRE loans and lines of credit are generally protected by liens against the residential properties. This booklet addresses the risks inherent in RRE lending generally as well as risks unique to specific lending activities and products. It also discusses the OCC's supervisory expectations and regulatory requirements for prudent risk management. For information related to originating mortgages for sale, refer to the "Mortgage Banking" booklet of the Comptroller's Handbook. This booklet includes supplemental procedures to facilitate the supervision and examination of RRE lending activities. The procedures include an internal control questionnaire and verification procedures to support the examination process. Further, this booklet uses three distinct categories of lending operations: (1) a portfolio lender, such as a community bank or FSA with limited product offerings; (2) a departmental or divisional lender, such as a larger community bank or FSA with wider product offerings and more robust staffing; and (3) a large lender, such as a regional bank or FSA with a large menu of products and a dedicated staff of lending personnel. The size, scope, and complexity of each activity affect associated risks and the required risk management systems. Appendix C contains a table that details the basic characteristics of each category relative to RRE lending activities. The goal is to help the reader determine if the quality of the bank's risk management practices is commensurate with the quantity of risk being assumed by offering RRE loan products.