Agencies Provide Guidance on Loans Modified Due to COVID-19

Loan modifications for borrowers affected by the coronavirus pandemic will not generally be required to be treated as troubled debt restructurings (TDRs), federal financial institution agencies and state banking regulators said on March 22.

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.” This includes short-term 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.

The guidance also addresses past-due reporting, nonaccrual status, charge-offs, and the eligibility of modified loans as discount window collateral.

Read the interagency statement.