Loans Modified Due to COVID-19 Generally Not Treated as TDRs, Agencies Clarify

Loan modifications for borrowers affected by the coronavirus pandemic will not generally be required to be treated as troubled debt restructurings, federal and state banking agencies said today.

The agencies said they had confirmed with Financial Accounting Standards Board 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.” These include short-term—for example, six months—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. Otherwise good single-family mortgage loans modified for COVID-19 reasons will likewise not be considered restructured or modified under risk-based capital rules.

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