fined $30 million by federal banking regulators after an investigation found
that the bank was not selling foreclosed homes back into the market fast
The Office of the
Comptroller of the Currency announced Friday that it fined Citibank $30
million for “violations related to the holding period of other real estate
Under federal banking regulations, there is a two-year limit
on banks maintaining possession of a foreclosed property. The rules stipulate
that banks can apply for an annual exemption that can push their ownership of a
property to as much as five years.
But after that, the bank is supposed to sell the property
back into the market to prevent available housing inventory from being kept away
from would-be homebuyers.
And according to the OCC, Citibank violated that rule by
holding onto hundreds of foreclosures for longer than the five-year limit.
“The OCC found the bank engaged in repeated violations of
the statutory holding period for OREO,” the OCC said in a statement. “These
violations resulted from the bank’s deficient processes and controls in the
identification and monitoring of the OREO holding period. In assessing this
civil money penalty, the OCC found the bank failed to meet its commitment to
implement corrective actions, resulting in additional violations.”
A quick note of explanation on the use of the term “OREO” by
the OCC: Most in the housing industry refer to foreclosures as REOs, for
real-estate owned, but federal regulators like the OCC and the Federal Reserve refer to them as OREO,
for other real estate owned.
According to the OCC order, an investigation found more than
200 violations of the foreclosure sale time limit rule between April 4, 2017
and Aug. 14, 2019.
But, Citibank states that the problem was limited to those
“The maximum holding period for foreclosed properties by a
national bank may not exceed five years. In some instances, we did not
meet the requirement,” the bank said in a statement.
“The issue, involving approximately 200 properties,
was identified in 2015 and there was no impact on our customers,” the bank
“Since identifying the issue, we have strengthened
controls, processes and procedures to ensure the timely disposition of these
assets,” the bank added. “Most importantly, we consistently worked to ensure
the responsible disposition of the properties to avoid negatively affecting the
real estate market in those communities.”
As Citibank noted, the problem began in 2015. According to
the OCC, in 2015, the bank found its own processes to be “deficient.” More
specifically, the bank “lacked adequate policies, procedures, and processes to
effectively identify and monitor the holding period for OREO assets,” the OCC
The OCC stated that at that time, Citibank “committed to
developing and implementing corrective actions to address these deficiencies.”
But, the bank later submitted multiple requests to extend
the holding period for REO properties that were “not made timely and resulted
in numerous additional violations,” the OCC said.
Then, in April 2017, the OCC told Citibank that its internal
controls on REOs remained “decentralized, ineffective, and inadequate.” After
that, Citibank continued to submit “untimely requests” to extend the REO
holding period, the OCC said.
And things didn’t get much better from there.
“Following additional efforts to correct the root cause of the continued OREO holding period violations, the Bank recommitted to implementing corrective actions by August 31, 2018,” the OCC said. “The Bank failed to meet its commitment, resulting in additional violations.”
According to the OCC, the bank has made progress in dealing the REOs in question. In fact, the regulator states that Citibank has “significantly reduced” its REO holdings in the last year.
“The OCC continues to monitor the Bank’s progress to
implement the required corrective actions to attain effective policies,
procedures, and processes to identify and monitor the holding period for OREO
assets in compliance with the law and regulation,” the OCC stated. “As part of
these efforts the Bank has, over the last twelve months, significantly reduced
its inventory of OREO assets.”
According to the OCC, Citibank has already paid the penalty
to the Department of the Treasury.