(a) Adoption of written policies. Each state bank that is a member
of the Federal Reserve System shall adopt and maintain written policies
that establish appropriate limits and standards for extensions of
credit that are secured by liens on or interests in real estate, or
that are made for the purpose of financing permanent improvements
to real estate.
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(b) Requirements of lending
policies.
(1) Real estate lending policies adopted
pursuant to this section shall be—
(i) consistent with safe
and sound banking practices;
(ii) appropriate to the size of the
institution and the nature and scope of its operations; and
(iii) reviewed and approved
by the bank’s board of directors at least annually.
(2) The lending policies
shall establish—
(i) loan-portfolio-diversification standards;
(ii) prudent-underwriting
standards, including loan-to-value limits, that are clear and measurable;
(iii) loan-administration
procedures for the bank’s real estate portfolio; and
(iv) documentation, approval, and reporting
requirements to monitor compliance with the bank’s real estate lending
policies.
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(c) Monitoring conditions. Each member bank
shall monitor conditions in the real estate market in its lending
area to ensure that its real estate lending policies continue to be
appropriate for current market conditions.
(d) Interagency guidelines. The real estate
lending policies adopted pursuant to this section should reflect consideration
of the Interagency Guidelines for Real Estate Lending Policies (contained
in appendix C of this part) established by the federal bank and thrift
supervisory agencies.
