Several governmental agencies have issued a statement encouraging financial institutions to work with borrowers affected by the COVID-19 pandemic. The Board of Governors of the Federal Reserve System, Conference of State Bank Supervisors, Consumer Financial Protection Bureau, Federal Deposit Insurance Corporation, National Credit Union Administration, and Office of the Comptroller of the Currency issued a press release on March 22, 2020.
The agencies said they will not criticize financial institutions who work with such borrowers and will not make institutions categorize any loan modifications as troubled debt restructurings. Specifically, short-term modifications of loan terms made in good faith to borrowers who were current prior to any relief will not be considered troubled debt restructurings.
The press release indicates the agencies’ view that working with struggling borrowers during this tough time is a positive and proactive action that can lead to improved loan performance and reduced credit risk in the long run.