Loans Modified Due to COVID-19 Generally Not Treated as TDRs, Agencies Clarify

Posted: Mar 23 2020

According to federal and state banking agencies loan modifications for borrowers affected by the coronavirus pandemic will not generally be required to be treated as troubled debt restructurings.

The agencies said they had confirmed with FASB staff that “short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not TDRs.” These include short-term—for example, six months—modifications like payment deferrals, fee waivers and repayment term extensions.

Meanwhile, the agencies said 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. Otherwise good single-family mortgage loans modified for COVID-19 reasons will likewise not be considered restructured or modified under risk-based capital rules. The guidance also addresses past-due reporting, nonaccrual status, charge-offs and the eligibility of modified loans as discount window collateral.

To read more visit: https://www.fdic.gov/news/news/press/2020/pr20038a.pdf