NCUA Issues Revised Interagency Statement on Loan Modifications During COVID-19

The statement encourages financial institutions to work constructively with borrowers affected by the coronavirus.

4/14/2020Compliance image

The National Credit Union Administration, along with the other federal financial institution regulatory agencies, in consultation with state financial regulators, issued a revised interagency statement encouraging financial institutions to work constructively with borrowers affected by the COVID-19 pandemic and providing additional information regarding loan modifications. The revised statement also provides the agencies’ views on consumer protection considerations.

The agencies view loan modification programs as positive actions that can mitigate adverse effects on borrowers due to the COVID-19. The agencies state that they will not criticize institutions for working with borrowers in a safe and sound matter. In addition, the agencies state they will not criticize financial institutions that mitigate credit risk through prudent actions consistent with safe and sound practices. The agencies consider such proactive measures to be in the best interest of institutions, their borrowers, and the economy. This approach is consistent with the agencies’ longstanding practice of encouraging financial institutions to assist borrowers in times of natural disaster and other extreme events, although the agencies recognize that the effects of this event are particularly extreme and broad-based.

The interagency statement also provides insight into accounting and reporting considerations for eligible loan modifications under Section 4013 of the CARES Act, or in accordance with ASC Subtopic 310-40. The statement also discusses credit risk, regulatory capital, past due reporting, nonaccrual status, and charge-offs.

Credit unions may wish to seek advice from their tax accounting professionals to better understand the correct accounting under the new guidance.

Question of the Week

Q. If a check is made out to two people, can the credit union accept it for deposit with only one signature?  

A. If a check is made out to two or more people and indicates that the funds are jointly owned (for instance, with an “and” joining the parties), all parties are required to sign the check. If, on the other hand, the check indicates that the funds belong to any one of the people on the check (for instance, with an “or” joining the parties), any one of the signatures is required.

When it is impossible to determine whether the funds are jointly or alternatively owned (for instance, with only a comma separating the parties), the assumption is that the check is payable to the people alternatively, and, therefore, only one signature is required.

Resources

RCW 62A.3-110(d)
ORS 73.0110(4)
IDS 28-3-110

Legal Briefs

National Credit Union Administration (NCUA)

SBA Loan Programs to Help Small Businesses and Members During the COVID-19 Pandemic
The NCUA issued Letter to Credit Unions 20-CU-06 to provide an overview for credit unions of the Small Business Administration (SBA) Paycheck Protection Program and COVID-19 Economic Injury Disaster Loans. The NCUA states that it will not criticize credit unions’ good faith efforts to prudently use the SBA programs with members affected by COVID-19, but stresses that credit unions and their members should review the interim final rule and any subsequent changes.

Summary of Coronavirus Aid, Relief, and Economic Security (CARES) Act
The NCUA release letter to Credit Unions 20-CU-07, which provides a high level overview about key changes from the CARES Act.

Agencies Issue Revised Interagency Statement on Loan Modifications by Financial Institutions Working with Customers Affected by the Coronavirus
The revised statement clarifies the interaction between the interagency statement issued on March 22, and the temporary relief provided by Section 4013 of the Coronavirus Aid, Relief, and Economic Security Act, which was signed into law on March 27. Section 4013 allows financial institutions to suspend the requirements to classify certain loan modifications as troubled debt restructurings (TDRs). The revised statement also provides supervisory interpretations on past due and nonaccrual regulatory reporting of loan modification programs and regulatory capital.

NCUA Board Agenda for April 16 Meeting
Matters to be considered include interim final rule to expand the Central Liquidity Facility, interim final rule on real estate appraisal relief, final rule to raise the residential real estate appraisal threshold to $400,000, and other regulatory relief in response to the COVID-19 pandemic.

NCUA Increases Funding for COVID-19 Emergency Response Grants
The NCUA is committing $1,370,000 for grants to eligible low-income credit unions, an increase of $575,000 from the $800,000, which was originally announced on March 31.

Consumer Financial Protection Bureau (CFPB)

Policy Statement on Supervisory and Enforcement Practices Regarding the Remittance Transfer Rule in Light of the COVID-19 Pandemic
The CFPB released a policy statement that announces that through Jan. 1, 2021, the CFPB will neither cite supervisory violations nor initiate enforcement actions against certain remittance transfer providers in connection with an exception to the rule that is expiring in July 2020.

Federal Reserve Board (FRB)

Federal Reserve Takes Additional Actions to Provide up to $2.3 Trillion in Loans to Support the Economy
The FRB announced taking additional actions to provide up to $2.3 trillion in loans to support the economy. Of interest for credit unions will be the Paycheck Protection Program Liquidity Facility (PPPLF) which will extend credit to eligible financial institutions that originate PPP loans, taking the loans as collateral at face value.

Internal Revenue Service (IRS)

Treasury, IRS Launch New Tool to Help Non-Filers Register for Economic Impact Payments
The Treasury Department and IRS launched a new web tool which will allow quick registration for Economic Impact Payments for those who don’t normally file a tax return.

NACHA

ACH Network Rules Pandemic-Related Frequently Asked Questions
NACHA has developed a FAQ based on information it has provided, information it has learned, and inquiries posed to NACHA by industry participants.

ACH Network is Ready to Deliver Stimulus Payments
NACHA is reminding everyone that the ACH Network is ready to and has the ability to deliver the stimulus payments.

Washington State Department of Financial Institutions Division of Credit Unions (DCU)

Guidance for Washington State Chartered Credit Unions Responding to COVID-19
The DCU has released guidance for Washington state chartered credit unions to provide additional guidance regarding the DCU’s expectations for credit unions responding to COVID-19. The DCU emphasizes that credit unions should help members through this difficult time through responsible credit administration consistent with safe and sound practices, fair lending treatment and administration consistent with safe and sound practices. The guidance provides examples of actions credit unions may consider, considerations for certain areas that DCU examiners will be looking at in future exams, and additional resources for credit unions.

Office of Foreign Assets Control (OFAC)

OFAC has updated the SDN list as of April 6. The last update prior to this was March 26.

Questions? Contact the Compliance Hotline: 1.800.546.4465, [email protected].