Banking Regulators to "Exercise Judgment" When Reviewing COVID-19-Related Loan Modifications

In a joint statement, federal and state banking regulators encouraged financial institutions to work with borrowers who may not able to satisfy their financial obligations due to COVID-19.

The Federal Reserve Board ("FRB"), FDIC, National Credit Union Administration ("NCUA"), the Office of the OCC, the CFPB and Conference of State Bank Supervisors (the "regulators") stated that loan modification programs are "positive actions" to avoid adverse effects on borrowers impacted by COVID-19. The regulators clarified that they would not: (i) require financial institutions to categorize borrowers who receive loan modifications due to COVID-19 as "troubled debt restructurings"; or (ii) criticize financial institutions for implementing a credit risk mitigation strategy relating to borrowers and the COVID-19 pandemic.

In addition, the regulators weighed in on certain financial institution practices including (i) accounting for loan modifications, (ii) past due reporting, (iii) nonaccrual status and charge-offs, and (iv) assessment of discount window eligibility.