ALEXANDRIA, Va.–NCUA, along with the Office of the Comptroller of the Currency (OCC), the Federal Reserve and FDIC, along with state bank and credit union regulators have issued an interagency Policy Statement on Prudent Commercial Real Estate Loan Accommodations and Workouts.
“The Statement is a principles-based resource for credit unions to consider when engaging with commercial real estate borrowers experiencing financial difficulties,” the agencies said.
According to the agencies, the Statement replaces the Policy Statement on Prudent Commercial Real Estate Loan Workouts (2009 Statement) that was adopted by the agencies, the Federal Financial Institutions Examination Council State Liaison Committee, and the former Office of Thrift Supervision.
The statement is being issued as concerns have increasingly been raised about growing risks to commercial loans from weakness in the sector due to office space that has been vacated as a result of more employees working from home.
Minimal Risk at CUs
NCUA has told CUToday.info it believes the risk is minimal in credit unions, given that most “commercial loans” in CUs are in one-to-four family homes.
“The updates reinforce and build on existing supervisory guidance calling for financial institutions to work prudently and constructively with creditworthy borrowers during times of financial stress,” the agencies said.
The statement is substantially similar to a proposal issued last year and includes minor changes in response to comments, according to the agencies.
Additional Updates
The agencies further stated:
- The statement updates and supersedes the previous guidance on commercial real estate loan workouts issued in 2009.
- The statement includes a section on short-term loan accommodations that was not included in the previous guidance. An accommodation includes an agreement to defer one or more payments, make a partial payment, or provide other assistance or relief to a borrower who is experiencing a financial challenge. Additionally, the statement addresses recent accounting changes for estimating loan losses and provides examples of how to classify and account for loans affected by workout activity.
- The statement applies to all financial institutions supervised by the agencies.
The full letter can be found here.
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