The board of each institution engaged in lease underwriting must adopt a written policy (or policies). Management, at the direction of the board, must develop procedures that reflect lease practices that control risk and comply with all applicable laws and regulations. Any leasing activity must comply with the lending policies and loan underwriting requirements in § 614.4150 of this chapter. An institution engaged in the making, buying, or syndicating of leases also must adopt written policies and procedures that address the additional risks associated with leasing. Written policies and procedures must address the following, if applicable:
Appropriateness of the lease amount, purpose, and terms and conditions, including the residual value established at the inception of the lease;
Process for estimating the leased asset's market value during the lease term;
Types of equipment and facilities the institution will lease;
Remarketing of leased property and associated risks;
Property tax and sales tax reporting;
Title and ownership of leased assets;
Title and licensing for motor vehicles;
Liability associated with ownership, including any environmental hazards or risks;
Insurance requirements for both the lessor and lessee;
Classification of leases in accordance with generally accepted accounting principles; and
Tax treatment of lease transactions and associated risks.
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