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Financial Services Law Insights and Observations

Agencies revise reporting guidance during Covid-19 pandemic

Federal Issues Agency Rule-Making & Guidance CFPB Credit Report Mortgages Mortgage Servicing CARES Act SBA Covid-19

Federal Issues

On April 7, the Federal Reserve (Fed), FDIC, OCC, CFPB, and NCUA (agencies) issued a revised interagency statement for financial institutions regarding loan modifications for customers affected by Covid-19. As previously covered by InfoBytes, the agencies issued the initial interagency statement on March 22, which stated that the agencies would not require loan modifications made as a result of Covid-19 to be categorized as troubled debt restructurings (TDRs), and additionally that the agencies would not criticize implementation by financial institutions of credit risk mitigation procedures.

Among other things, the revised interagency statement encourages financial institutions to continue to adhere to consumer protection laws, such as fair lending laws, as they assist borrowers who have been negatively impacted by Covid-19. The agencies take a favorable view of loan modification programs intended to assist borrowers affected by Covid-19 and note that financial institutions will not be criticized “for working with borrowers in a safe and sound manner.” In addition, with respect to credit risks, examiners will refrain from issuing automatic adverse risk ratings when reviewing loan modifications impacted by Covid-19. The revised statement explains that the CARES Act created a forbearance program for borrowers affected by Covid-19, and that under Section 4013 of the Act, financial institutions are not required to “report section 4013 loans as TDRs in regulatory reports.” Furthermore, deferrals granted to borrowers affected by Covid-19 do not need to be classified as “past due because of the deferral.”

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