WASHINGTON (2/13/12)--The National Credit Union Administration's (NCUA) Troubled Debt Restructuring (TDR) proposal, which has been labeled as a potential "important step forward" by the Credit Union National Association (CUNA), is out for comment, and CUNA is seeking credit union comment as it develops its own comment letter.
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.
Current TDR reporting requirements force credit unions to segregate TDRs and report TDR payments as delinquent until the member has made timely and consecutive payments for six months after the modification. Credit unions are also usually required to manually track such payments. Many credit unions are struggling to work with homeowners that cannot pay their mortgage due to financial difficulties.
The NCUA's TDR proposal, which was released at last month's open board meeting, would allow credit unions to modify TDR loans without having to immediately classify those loans as delinquent. Credit unions would no longer be forced to track each TDR loan's performance manually for six months. The proposal would also set consistent standards for the management of loan workout arrangements that assist borrowers, and eliminate confusion between TDRs and other loan modifications.
CUNA in the comment call asks whether loan workout policies created under the proposed regulations should tie aggregate program limits to net worth, rather than unimpaired capital and surplus. The comment calls questions also ask for more specific, technical comments on accrual loan status, parts of the proposal that impact the "past due" definition, TDR data elements,
Credit unions can also suggest any additions they would make to the TDR proposal, and comment on whether the proposed effective date, which would be 120 after the final rule is published in the Federal Register, and comment period should be extended.
CUNA is accepting comments until February 22. Comments to the NCUA are due by March 2.
For the full comment call, use the resource link.