On Sunday evening, federal financial and state banking regulators (Agencies) jointly issued an interagency statement encouraging financial institutions to assist borrowers impacted by the coronavirus pandemic. The Agencies are promoting the use of loan modification programs to provide temporary relief to borrowers affected by COVID-19 and, ultimately, to mitigate credit risk. Suggested modifications include “payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant.”
- To alleviate concerns relating to reporting requirements, the Agencies stated that:
- Financial institutions are not required to automatically categorize COVID-19-related loan modifications as troubled debt restructurings (TDRs);
- Good faith, short-term loan modifications in response to COVID-19 are not TDRs, provided the borrowers were current prior to any relief;
- Financial institutions, in general, will not be expected to designate loans with deferrals granted to impacted borrowers "as past due because of the deferral";
- Loans to stressed borrowers "generally should not be reported as nonaccrual" during the pendency of these "short-term arrangements."
The Agencies comprise the Board of Governors of the Federal Reserve System, Consumer Financial Protection Bureau, Federal Deposit Insurance Corporation, National Credit Union Administration, Office of the Comptroller of the Currency, and Conference of State Bank Supervisors.