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NCUA considering TDR proposal
ALEXANDRIA, Va. (7/18/11)--National Credit Union Administration (NCUA) Board Member Gigi Hyland has hinted that the agency could soon release an Interpretive Ruling and Policy Statement (IRPS) addressing Troubled Debt Restructurings (TDR). Hyland in July’s edition of The NCUA Report said that the proposal would recommend that credit unions adopt charge-off, loan grading and modification frequency standards that are similar to those currently used by banks. TDR loans, which have very specific accounting and reporting requirements, sometimes occur as a result of loan modifications. The financial statement notes and call report data associated with TDRs are also unique. Credit unions would be advised to create and implement their own limits on the number and frequency of loan extensions, loan deferrals, loan renewals and loan rewrites, according to Hyland. She added that the potential guidance “would emphasize the need for comprehensive and effective risk management, reporting and internal controls related to these types of loans.” The IRPS would also encourage credit unions to “adopt standards prohibiting additional advances that finance the unpaid interest and fees on these loans,” she said. A similar approach could also be applied to closed-end and open-end loans that are secured by one- to four-family residential dwellings, she added. The agency addressed TDR-related issues in a webinar earlier this year. For July’s NCUA report, use the resource link.
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