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TDR plan moves in right direction CUNA
WASHINGTON (3/6/12)--The National Credit Union Administration's (NCUA's) Troubled Debt Restructuring (TDR) proposal would provide regulatory relief, and is "an important step forward in terms of guidance and reporting requirements for TDRs," the Credit Union National Association said in a 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—often involving modification to the terms of a loan—to a borrower that it would not have otherwise provided based on the borrower's financial situation. The financial statement and call report  treatment of  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. These requirements have generally resulted in credit unions having to manually track such payments.

CUNA noted that many credit unions want to work with homeowners that cannot pay their mortgages due to financial difficulties but have struggled to meet regulatory and reporting requirements that have been imposed on TDRs.

The NCUA's TDR proposal 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.

However, Deputy General Counsel Mary Dunn, in CUNA's  comment letter, noted that the TDR proposal's different treatment of member business loans (MBLs) could create issues for credit unions with certain processing systems, forcing those credit unions to manually track MBLs that have been modified.

The NCUA proposed making the TDR rules effective 120 days after the final version of the rule is published in the Federal Register. While the rule should become effective "as soon as possible" for credit unions that are able to comply with the changes, CUNA encouraged the NCUA to give small credit unions more time to comply with the TDR changes.

CUNA had urged NCUA to improve reporting and regulatory treatment for TDRS for some time and leagues also had weighed in to urge the agency to move forward with improvements in this area.

CUNA's letter was developed with its Examination and Supervision and Accounting Subcommittee, as well as with the American Association of Credit Union Leagues' Regulatory Advocacy Advisory Committee.

For the full CUNA comment letter, use the resource link.

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