July 02, 2021

NAFCU issues Final Reg on NCUA's capitalization of interest rule


NAFCU Thursday sent a Final Regulation Alert to members breaking down the NCUA’s final rule that ends the prohibition against the capitalization of interest in connection with loan workouts and modifications. The association's Final Regulation Alerts are member-only resources that feature full text and easy to read summaries for final rulemakings affecting credit unions.

The NCUA’s final rule will allow FICUs to regain access to an important loan modification tool, which will help them better manage loan portfolio risks and help ensure more members remain in their homes and more small businesses remain open.
In NAFCU’s Final Regulation summary, the association noted that:

  • The Board adopted, without change, its proposed rule issued in December 2020 and summarized in a prior NAFCU Regulatory Alert.
  • The final rule provides that federally-insured credit unions (FICUs) may capitalize interest in connection with the workout or modification of any loan, including commercial and business loans, only if FICUs meet Appendix B’s expanded consumer protection and safety and soundness requirements.
  • The final rule provides that the NCUA will consider the COVID-19 pandemic’s uniquely deleterious impact and previous interagency examiner guidance encouraging prudent loan workouts and modifications when assessing FICUs’ loan modification actions, including any related capitalizations of interest, completed prior to the final rule’s effective date.

The rule became effective July 30. For detailed background information of the finalized rule, including a section-by-section analysis, view the Final Regulation.