April 08, 2020

FI regulators revise guidance on TDRs


The NCUA yesterday joined with other federal and state regulators to release a revised interagency statement encouraging financial institutions to work constructively with borrowers impacted by the coronavirus and providing additional information regarding loan modifications. The revised statement also clarified interactions between the original interagency statement released last month and the temporary relief provided by the CARES Act.

Section 4103 of the CARES Act allows financial institutions to suspend the requirements to classify certain loan modifications as troubled debt restructurings (TDRs). The revised joint agency statement indicated that institutions will not be criticized for their “prudent efforts to modify terms on existing loans for affected customers” regardless of whether modifications are considered TDRs or are adversely classified.

On the topic of loan modifications, the agencies noted that prudent loan modifications are “positive and proactive actions” that, when offered to those affected by the coronavirus, have the ability to “manage or mitigate adverse impacts on borrowers, and lead to improved loan performance and reduced credit risk.” The statement provided additional supervisory interpretations on past due and nonaccrual reporting of loan modification programs.

Late last month, NAFCU President and CEO Dan Berger urged the NCUA to offer further flexibility and relief regarding the anticipated uptick in TDRs due to businesses and consumers being unable to recover in time to resume normal payments within the next six months.

Berger called for the NCUA to further ease compliance requirements for loan modifications by reinterpreting the capitalized interest section of Part 741 Appendix B to be consistent with the requirements of Fannie Mae and Freddie Mac, the government-sponsored enterprises (GSEs), and provide parity with banks.

To assist with NAFCU's advocacy efforts, credit unions are encouraged to email any updates on how their institution is being impacted and steps that they are taking to help members to

Access the association’s summary of the CARES Act's key provisions. Stay tuned to NAFCU Today for the latest developments and visit the association's coronavirus resource page.