Guidance for Credit Unions Impacted by COVID-19
On March 22, 2020, the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), the Office of the Comptroller of the Currency (OCC), the Consumer Financial Protection Bureau (CFPB), and the State Banking Regulators (hereafter, the agencies) issued guidance to credit unions on working with members related to loans impacted by COVID-19.
The guidance addresses accounting and regulatory reporting when members are experiencing financial distress related to COVID-19 that is impacting their ability to make contractual loan payments. If credit unions offer these borrowers forbearance, modifications, or restructurings, many such loans will not be considered troubled-debt-restructuring loans (TDR) for accounting and regulatory purposes. In addition, many of these forbearances, modifications, or restructuring agreements will not result in reporting the member as delinquent in call report filings. Some of the key points in the guidance include:
If a loan is current before COVID-19 and gets modified to defer payments, it does not have to be reported as delinquent.
If a loan is past due 60 days and then there is a modification due to COVID-19, it can remain as 60 days past due.
Non-performing loans before COVID-19, cannot move to performing status post-modification.
Modifications, restructurings, and payment deferrals do not have to automatically be categorized as TDRs.
The regulators and the Financial Accounting Standards Board (FASB) have ruled that any payment deferrals of six-months or less would not be considered a TDR. However, if the loan was greater than 30 days delinquent prior to the COVID-19 emergence, the conclusion may be different and will require more judgment.
The rules are not easy to interpret and are somewhat subjective. We suggest that you discuss this guidance with your auditors before making any modifications such as payment deferrals, fee waivers, extensions of payment terms, or other modifications for your members. You can always contact Whittlesey if you want to discuss this guidance in more detail.
We are also providing the following downloadable documentation:
- Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus
- Frequently Asked Questions for Financial Institutions Affected by the Coronavirus Disease 2019 (Referred to as COVID-19)
Stay current with Whittlesey’s COVID-19 Resource Center
Disclaimer: Our content, comments, and answers to questions should not be construed as specific advice for your particular situation. The statutes and rules related to the SBA lending provisions and other programs are complex and you should consult with your financial and tax advisors for guidance regarding the application of the law to your particular facts and circumstances.
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