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Financial Services Law Insights and Observations

Financial regulators provide supervisory relief, and VA encourages mortgage relief to veterans after Tennessee tornadoes

Federal Issues Federal Reserve State Issues Disaster Relief Consumer Finance FDIC OCC NCUA Department of Veterans Affairs Mortgages

Federal Issues

On March 12, the OCC, Federal Reserve Board, FDIC, NCUA, and the Tennessee Department of Financial Institutions issued an interagency statement on supervisory practices for financial institutions affected by the recent tornadoes in Tennessee. Among other things, the agencies called on financial institutions to “work constructively” with affected borrowers, noting that “prudent efforts” to adjust loan terms in affected areas “should not be subject to examiner criticism.” Institutions facing difficulties in complying with any publishing and reporting requirements should also contact their primary federal and/or state regulator. Additionally, the agencies noted that institutions may receive Community Reinvestment Act consideration for community development loans, investments, and services that revitalize or stabilize federally designated disaster areas. In FIL-16-2020, the FDIC further encouraged supervised institutions to consider, among other things, (i) extending repayment terms; (ii) restructuring existing loans; or (iii) easing terms for new loans to affected borrowers, if done in a manner consistent with sound banking practices. The FDIC stated it will also consider regulatory relief from certain filing and publishing requirements.

Separately, on March 10, the Department of Veterans Affairs (VA) issued Circular 26-20-5 to encourage mortgagees to provide relief for VA borrowers affected by the recent tornadoes in Tennessee. The Circular encourages loan holders and servicers to (i) extend forbearance to distressed borrowers and to members of the National Guard assisting in the recovery efforts; (ii) establish a 90-day moratorium on initiating new foreclosures; (iii) waive late charges; and (iv) suspend credit reporting on affected loans. The Circular will be rescinded April 1, 2021. Mortgage servicers and veteran borrowers are also encouraged to review the VA’s Guidance on Natural Disasters.

Find continuing InfoBytes coverage on disaster relief guidance here.

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