MBA, Trade Groups Urge Changes to Risk-Based Capital Guidance for COVID-19 Loan Modifications

The Mortgage Bankers Association, the American Council of Life Insurers and nine other trade associations urged the National Association of Insurance Commissioners to change recent risk-based capital guidance on relief for COVID-19-related loan modifications. 

The groups submitted a letter on Friday responding to NAIC Risk-Based Capital Guidance issued March 27. The letter recommended:

–Expanding the period covered by the Guidance through December 31, 2020;

–Ensuring that potential future risk-based capital treatment of COVID-19 modifications does not create impediments to making prudent modifications now; and

–Conforming the scope of loan modifications covered by the risk-based capital Guidance to the scope of modifications covered by NAIC accounting guidance on COVID-19-related modifications.

The letter is part of MBA’s effort to remove NAIC life company risk-based capital and accounting impediments to prudent loan modifications. These efforts include an April 2 industry “interested party” letter that recommended changes to two NAIC accounting interpretations on COVID-19 modifications that NAIC issued March 26. The current state of the NAIC issuances and MBA responses is summarized in this table.

While the NAIC guidance and interpretations were a good start, said Bruce Oliver, MBA Associate Vice President of Commercial/Multifamily, NAIC has not yet provided enough clarity and relief for life companies to rely on. As a result, loan modification requests continue to pile up.

MBA and member companies will continue to communicate the urgency of this matter with NAIC decision makers.

Oliver noted the MBA Life Company Risk-Based Capital Working Group, in particular John Waldeck of Pacific Life and John Foley of Lincoln Financial Group, helped develop and communicate these recommendations.

For additional information or to join the MBA Life Company Risk-Based Capital Working Group, contact Oliver at or 202-557-2840.