Agencies update guidance on troubled debt restructurings

Apr 08, 2020

Financial regulators issued a revised interagency statement on working with borrowers affected by COVID-19 with additional information regarding loan modifications.

The revised statement clarifies the interaction between the interagency statement issued on March 22 and the ICBA-advocated CARES Act provision ensuring coronavirus-related loan modifications are not classified by regulators as troubled debt restructurings.

To be an eligible loan under section 4013 of the law, a loan modification must be (1) related to COVID-19; (2) executed on a loan that was not more than 30 days past due as of Dec. 31, 2019; and (3) executed between March 1, 2020, and the earlier of 60 days after the date of termination of the National Emergency or Dec. 31, 2020.

The statement says the agencies' examiners will exercise judgment in reviewing loan modifications, including TDRs, and will not automatically adversely risk-rate credits that are affected by COVID-19.