On March 22, 2020, an Interagency statement, which includes every national financial services regulating body, was issued providing guidance for lending institutions in granting and reporting of loan modifications on loans who’s borrowers are experiencing financial difficulty as the result of the COVID-19 Pandemic. In this memo, the agencies confirm that they have received guidance from the Financial Accounting Standards Board (FASB) that loan modifications up to six months in duration may be granted with no necessary troubled debt restructuring (TDR) or non-accrual status reporting.
The statement,
issued Sunday evening by the Board
of Governors of the Federal Reserve System; the Federal Deposit Insurance
Corporation (FDIC); the National Credit Union Administration; the Office of the
Comptroller of the Currency; the Consumer Financial Protection Bureau; and the
Conference of State Bank Supervisors, advises that examiners will “exercise judgment” in
reviewing loan modifications and “not automatically adversely risk rate credits
that are affected by COVID-19,” including those that are designated as TDRs.
The guidance also addresses past-due reporting,
nonaccrual status, charge-offs, and the eligibility of modified loans as
discount window collateral.
“With some clarity on virus-related loan flexibility, the time for borrowers and their advisers to act is now,” said Jason Brodmerkel of the AICPA’s Accounting Standards Group – Depository and Lending Institutions.
“Borrowers need to act fast and reach out to their institutions to ensure any COVID-19 relief necessary is provided prior to falling out of good standing with the institution,” Brodmerkel said. “In turn, institutions and audit firms should also reach out to their customers and clients to understand their needs during this unprecedented time and help provide relief, when necessary.”
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