NCUA Calls on Exempting CUs from CECL, Provides Guidance on Strategies for Working with Borrowers Affected by COVID-19

In an April 30 letter, National Credit Union Administration (NCUA) Chairman Rodney E. Hood urged the Financial Accounting Standards Board to exempt credit unions from complying with the current expected credit losses (CECL) methodology.

Hood wrote that "compliance costs associated with implementing CECL overwhelmingly exceed the benefits."

In addition, he argued that implementing CECL will have a chilling effect on lending, especially loans to low-income borrowers, and will negatively impact the net worth position of credit unions.

He noted that most credit unions are small and would face data collection challenges required by CECL.

Read the letter.

In a letter to credit unions, NCUA described various strategies that credit unions can employ to work with borrowers who experience financial hardship because of the COVID-19 pandemic.

The letter offers suggestions ranging from providing borrowers new funds to temporarily or permanently modifying loans.

The letter also describes how credit unions should monitor and report loan modifications.

Read the letter.

Modified Business Loans

As I reported earlier, NCUA stated that as of September 2010 federally-insured credit unions had modified approximately $11.2 billion in loans. NCUA reported that modified business loans accounted for almost $1.9 billion of the $11.2 billion in loan modifications.

Evangelical Christian CU (Brea, CA) has the most modified business loans at almost $159 million. The following table provides a listing of the credit unions with the most modified business loans. (click to enlarge the image)













NCUA also reported that the delinquency rates on modified commercial real estate loans and on modified non-real estate business loans were 24.18 percent and 18.54 percent, respectively.

America First in Riverdale, Utah reported having the most delinquent modified business loans at $43.59 million in business loans -- all were commercial real estate loans. The following table provides a ranking of the 25 credit unions with the most delinquent business loans. (click to enlarge image)

Loan Modifications, September 2010

NCUA reported that federally insured credit unions had approximately $11.2 billion in loan modifications on their books as of the end of September 2010. In other words, 1.98 percent of all loans on the books of credit unions have been modified.

The following table ranks the top 50 credit unions -- both federally insured and privately insured -- with at least $25 million in outstanding total loans as of September 30, 2010 that have the highest percentage of modified loans. (click on image to enlarge)

As of the end of the third quarter, thirty-eight credit unions reported having at least 10 percent of their outstanding loans modified with Beehive Credit Union in Utah reporting that almost 28 percent of its loans (dollar volume) have been modified.