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Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus

Posted by Jim Fraser on Mar 23, 2020 at 11:52 AM

In an effort to keep everyone up to date we will be posting notices as they are released. See the below statement from the FDIC.

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 an interagency statement providing additional information to financial institutions who are working with borrowers affected by the Coronavirus Disease 2019 (also referred to as COVID-19).

Because the United States has been operating under a presidentially declared emergency since March 13, 2020 and many financial institutions and their customers are impacted by the downstream effects of Covid-19, the agencies have said the following:

On Working with Customers

  • The agencies encourage financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations because of the effects of COVID-19.
  • The agencies will not criticize institutions for working with borrowers and will not direct supervised institutions to automatically categorize all COVID-19 related loan modifications as troubled debt restructurings (TDRs).
  • The agencies will not criticize financial institutions that mitigate credit risk through prudent actions consistent with safe and sound practices.
  • The agencies consider such proactive actions to be in the best interest of institutions, their borrowers, and the economy.
  • The agencies also will not criticize institutions that work with borrowers as part of a risk mitigation strategy intended to improve an existing non-pass loan.

On Accounting for Loan Modifications

  • Modifications of loan terms do not automatically result in TDRs.

On Past Due Reporting

  • Financial institutions are not expected to designate loans with deferrals granted due to COVID-19 as past due because of the deferral.

Nonaccrual Status and Charge-offs

  • Each financial institution should refer to the applicable regulatory reporting instructions, as well as its internal accounting policies, to determine if loans to stressed borrowers should be reported as nonaccrual assets in regulatory reports. However, during the short-term arrangements discussed in this statement, these loans generally should not be reported as nonaccrual.

On Discount Window Eligibility

  • Institutions are reminded that loans that have been restructured as described under this statement will continue to be eligible as collateral at the FRB’s discount window based on the usual criteria.

Read the full report here.

Source: FDIC

Topics: Construction Lending, covid-19

Jim Fraser

Jim Fraser

Jim Fraser has over 30 years of experience in financial services, with an emphasis in construction lending and real estate development. Fraser currently works at Built Technologies as Lending Channel Manager, overseeing Built's construction lending origination and loan administration platform solutions. Built’s platform has supported over $68B in construction commitments as of 2020 and is used by more than 130 of the nation’s leading construction lenders. Prior to working at Built, Fraser was EVP of Commercial Lending at Axos Bank [NYSE: AX], where he was responsible for commercial construction lending, income property, lender finance, equipment leasing and factoring, with a combined portfolio of $5 billion. Previously, Fraser was Managing Director at Banc of California [NYSE: BANC], managing $500 million in residential and CRE construction, including FNMA and FHA renovation lending programs under Banc Home Loans national mortgage lending brand and third-party, fee-based services under RenovationReady, a division of Banc Home Loans. He brings his banking expertise to the Built Technologies team as they build the leading solution for the entire construction finance ecosystem.

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