Interagency Statement on Loan Modifications for Customers Impacted by COVID-19

On April 7, 2020 the FDIC, the Office of the Comptroller of the Currency, the National Credit Union Administration, the Board of Governors of the Federal Reserve System, and the Consumer Protection Bureau issued a revised interagency statement regarding loan modifications and reporting by financial institutions working with customers affected by the ongoing COVID-19 (also referred to as the novel coronavirus) pandemic. The revised statement seeks to encourage financial institutions to work constructively and proactively with customers that have been impacted by the pandemic by outlining the ways in which the agencies will treat loan modifications issued for COVID-19 related reasons and the related reporting standards that will be applied, and also clarifies the interaction between the interagency statement and the optional temporary relief provided in Section 4013 of the CARES Act.

According to the statement, financial institutions may account for eligible loan modifications either under section 4013 of the CARES Act or in accordance with standard guidelines for Troubled Debt Restructurings ("TDRs"). To be eligible under section 4013 a loan modification must be:

  1. related to COVID-19;
  2. executed on a loan that was not more than 30 days past due as of December 31, 2019; and
  3. executed between March 1, 2020, and the earlier of (A) 60 days after the date of termination of the National Emergency or (B) December 31, 2020 (applicable period).

Institutions accounting for eligible loans under section 4013 are not required to apply standard TDR guidelines to those loans for the term of the modification and do not have to report those loans as TDRs; however, consistent with section 4013, institutions should maintain records of the volume of loans accounted for under that section.

Loan modifications not accounted for under section 4013 of the CARES Act will not automatically result in a TDR designation. The FDIC will view prudent modification programs offered to affected customers as positive actions that may improve customer capacity to service debt and facilitate the financial institutions ability collect on its loans; and the FDIC examiners have been directed to exercise significant flexibility in determining whether to adversely classify loans that are impacted by COVID-19. Relatedly, the Financial Accounting Standards Board has confirmed that short-term good faith modifications made for COVID-19 related reasons to borrowers who were current on their obligations are not TDRs.

Avoidance of the TDR designation will allow the financial institution to offer modifications to affected customers without having to report the loans as impaired. The statement also advises that loans restructured as described by the statement would still be eligible as collateral at the Federal Reserve Bank discount window.

The interagency statement may be found here.


Spotts Fain publications are provided as an educational service and are not meant to be and should not be construed as legal advice. Readers with particular needs on specific issues should retain the services of competent counsel.

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