John Zasada, Compliance Consulting Director, Financial Institutions Group

On March 22, 2020, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, the Consumer Financial Protection Bureau and the state banking regulators issued an interagency statement on providing borrowers with assistance related to COVID-19. COVID-19 is already causing many borrowers difficulties in making loan payments. The agencies are encouraging financial institutions to work with borrowers in modifying the terms of their loans in order to mitigate the financial problems caused by COVID-19. They state they “will not criticize financial institutions that mitigate credit risk through prudent actions consistent with safe and sound practice.” Information was provided related to how to account for the loan modifications and indicated that loan modifications do not automatically result in trouble debt restructurings. In addition, financial institutions are not expected to designate loans with deferrals granted due to COVID-19 as past due because of the deferral.

Read our recent Loan Modification Guidance Amid Coronavirus Pandemic article for more information.