Compliance Center: NCUA Issues Accounting Bulletin on Reporting TDR Loans

The National Credit Union Administration (NCUA) has issued Accounting Bulletin 14-1 adopting a revised regulatory reporting policy for loans that have been modified in a troubled debt restructuring (TDR).

The bulletin also provides clarification about the circumstances in which a subsequent restructuring of a TDR loan need no longer be treated as a TDR.

According to the agency, the bulletin is in response to frequent questions from credit unions about when a loan is no longer treated as a TDR. When a loan has previously been modified in a TDR, the lending institution and the borrower may subsequently enter into another restructuring agreement.

“The facts and circumstances of each subsequent restructuring of a TDR loan should be carefully evaluated to determine the appropriate accounting by the institution under U.S. generally accepted accounting principles,” the bulletin reads.

Federal financial regulators will “not object to an institution no longer treating such a loan as a TDR” if:

  • At the time of the subsequent restructuring the borrower is not experiencing financial difficulties;
  • Under the terms of the subsequent restructuring agreement, no concession has been granted by the institution to the borrower;
  • The subsequent restructuring agreement specifies market terms, including a contractual interest rate not less than a market interest rate for new debt with similar credit risk characteristics and other terms no less favorable to the institution than those it would offer for such new debt; and
  • The institution’s assessment of the borrower’s financial condition and prospects for repayment after the restructuring are supported by a “current, well-documented credit evaluation performed at the time of the restructuring.”

According to the NCUA, credit unions may choose to apply this guidance to subsequently restructured loans that meet the above conditions. Credit unions also may choose to apply this guidance to loans outstanding as of Sept. 30 for which there has been a previous subsequent restructuring that met the conditions discussed above at the time of the subsequent restructuring.

However, prior call reports should not be amended, according to the bulletin.

Compliance Question of the Week

Who is the member/customer when an account is opened by an individual who as power-of-attorney (POA)?

It depends.  A FAQ issued by FinCEN regarding CIP issues sheds some light on this topic:

The CIP rule provides that a “customer” generally is a “person that opens a new account.” 31 C.F.R. § 103.121(a)(3)(i)(A). When an account is opened by an individual who has power-of-attorney for a competent person, the individual with a power-of-attorney is merely an agent acting on behalf of the person that opens the account.  Therefore, the “customer” will be the named owner of the account rather than the individual with power-of-attorney over the account. By contract, an individual with power-of-attorney will be the “customer” if the account is opened for a person who lacks legal capacity. 31 C.F.R. § 103.121(a)(3)(i)(B)(1).

Related Links:

Legal Briefs

Consumer Financial Protection Bureau (CFPB)

The CFPB announced proposed updates to the TILA-RESPA final rule. The proposed updates include extra time to provide consumers with a revised Loan Estimate and making a minor addition to the Loan Estimate form.

The CFPB and Federal Trade Commission announced that they will co-host a “Debt Collection and the Latino Community” roundtable in Long Beach, California on October 23, 2014.

Federal Trade Commission (FTC)

The FTC announced that it is extending its request for comment on the review of its Telemarketing Sales Rule. The comment deadline was October 14, 2014 but has now been extended to November 14, 2014.

Office of Foreign Assets Control (OFAC)

OFAC has updated the SDN list as of September 30, 2014. The last update prior to this was September 24, 2014.

Questions? Contact the Compliance Hotline: 1.800.546.4465, compliance@nwcua.org.

Posted in Compliance News, NCUA.