Federal financial institution regulatory agencies have jointly issued a final policy statement on commercial real estate loan accommodations and workouts. The updates reinforce and build on existing supervisory guidance encouraging financial institutions to work responsibly with creditworthy borrowers during times of economic hardship. This policy statement has been jointly released by the FDIC, Federal Reserve, National Credit Union Administration (NCUA), and Office of the Comptroller of the Currency (OCC).
The statement is largely similar to an earlier proposal from 2022 that incorporated minor changes in response to comments received. It replaces previous guidance on CRE loan workouts issued in 2009.
The new document includes a section dedicated solely to short-term loan accommodations not present in prior versions; these include agreements for deferring one or more payments, making partial payments or providing other assistance/relief when borrowers experience financial difficulty. Furthermore, it addresses recent accounting changes for estimating losses associated with loans as well as provides examples illustrating how such loans should be classified/accounted for based upon workout activity outcomes. Finally, several hypothetical scenarios are provided which illustrate possible CRE loan workout arrangements under various conditions..
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