TDR Rule Model of 'Collaboration': CUNA, NCUA
NCUA Director of Examinations and Insurance Larry Fazio (center left) tells NCUA Chairman Debbie Matz (center right) that the agency soon will issue a supervisory letter to credit unions to explain elements of the new TDR rules, and train examiners on the rules. The agency will also hold separate training webinars for examiners and credit union staff. Shown to Matz's right is NCUA board member Michael Fryzel; to the chairman's left is NCUA board member Gigi Hyland.
TDR loans, which have very specific accounting and reporting requirements, include certain loan modifications where a credit union or other lender grants a concession to a borrower and modifies the terms of a loan based on the borrower's financial situation. The financial statement notes and call report data associated with TDRs are also unique.
Under the new rules, credit unions will soon be allowed to modify TDR loans without having to immediately classify those loans as delinquent. The new TDR rules, which will go into effect 30 days after they are published in the Federal Register, will set consistent standards for the management of loan workout arrangements that assist borrowers, and eliminate confusion between TDRs and other loan modifications. The rules also make some changes to loan status calculations, and require credit unions to to discontinue interest accrual on loans that are 90 days or more past their due date.
Credit unions will need to establish their own written policies for TDR management and loan workout arrangements, and NCUA Chairman Debbie Matz during the meeting said that credit unions will be given some freedom to design their own policies and plans.
Credit unions will need to develop new written loan workout policies by Oct. 1. Consistent with finance industry practices, credit unions will also need to discontinue interest accrual on loans that are 90 days or more past due, and establish requirements for returning such overdue loans to accrual status, the agency added.
The NCUA will revise its own call report data requirements to reflect the new TDR standards by Dec. 31.
Many credit unions have struggled to work with homeowners that cannot pay their mortgage due to financial difficulties, and Matz credited credit union trade associations and volunteers with first bringing this TDR issue to the agency's attention. Overall, she said fixing these issues was a "community effort."
The agency in its final rule adopted CUNA-recommended changes to the treatment of TDRs -- including ensuring the rule is consistent with U.S. generally accepted accounting principles--called GAAP-- and clarifying certain confusing terms.
NCUA Director of Examinations and Insurance Larry Fazio said the agency would soon issue a supervisory letter to credit unions to explain elements of the new TDR rules, and train examiners on the rules. The agency will also hold separate training webinars for examiners and credit union staff.
CUNA staff are reviewing the new TDR rule, with a particular eye on its treatment of member business loans.