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Interagency TDR Guidance Featured In This Week's Reg Report
WASHINGTON (11/5/13)--In this week's Regulatory Advocacy Report, the Credit Union National Association follows up on recent interagency guidance addressing accounting treatment and regulatory credit risk grading or classification of commercial and residential real estate loans that have undergone troubled debt restructurings (TDRs).

The guidance notes that financial institutions are expected to develop and apply an internal loan grading system consistent with supervisory guidance. Banks and savings associations are to maintain documentation that translates their system, if different, into the uniform regulatory classifications of substandard, doubtful, and loss. The National Credit Union Administration does not require credit unions to adopt a uniform regulatory credit grading system. A credit union should apply an internal loan grade based on its evaluation of credit risk.

The new guidance, Interagency Supervisory Guidance Addressing Certain Issues Related to Troubled Debt Restructurings, reiterates key aspects of previously issued regulatory guidance and discusses the definition of collateral-dependent loans and the circumstances under which a charge-off is required for TDRs. It was released jointly by the NCUA, the Federal Deposit Insurance Corp., the Federal Reserve and the Office of the Comptroller of the Currency.

"The agencies encourage financial institutions to work constructively with borrowers and view prudent modifications as positive actions when they mitigate credit risk. The agencies generally will not criticize financial institutions for engaging in prudent workout arrangements, even if the modified loans result in adverse credit classifications or constitute TDRs," according to the guidance.

This week's edition of the Report also features:
  • CUNA concerns regarding qualified mortgages (QM) and disparate impact;
  • Details on the NCUA's final rule on emergency liquidity and contingency funding plans;
  • The NCUA Office of Inspector General's report on that agency's process for documenting credit union failures;
  • CUNA's comment letter on the U.S. Department of Housing and Urban Development's proposed QM rule;
  • Projections on how far mortgage originations could decline in 2014; and
  • Details from a PEW report on payday lending.
A resource chart with information on current CUNA comment calls is also provided in the Report.

For this week's Regulatory Advocacy Report, CUNA members can use the resource link.
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