Regulators Issue Statement on Loan Modifications, Reporting for Institutions Working with Customers Affected by Coronavirus

On March 22 federal prudential regulators issued an Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by Coronavirus.

The statement clarified that temporary forbearance, concessions or modification on loans affected by the pandemic are not considered to be Troubled Debt Restructured (TDR) for GAAP purposes and need not be reported as past due.

The agencies said they encourage financial institutions to work prudently with borrowers who may be unable to meet their contractual payment obligations due to COVID-19 effects. They noted they view loan-modification programs as positive actions that can mitigate adverse effects on borrowers.

“Working with borrowers that are current on existing loans, either individually or as part of a program for creditworthy borrowers who are experiencing short-term financial or operational problems as a result of COVID-19, generally would not be considered TDRs,” the statement said. “With regard to loans not otherwise reportable as past due, financial institutions are not expected to designate loans with deferrals granted due to COVID-19 as past due because of the deferral.” The Interagency Statement was developed in consultation with Financial Accounting Standards Board staff and FASB released a statement saying its staff concurs in the prudential agencies’ approach.