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NCUA To Allow Interest Capitalization on TDRs?

68 Seconds on Capitalization of Interest on #TDRs

This weeks # NCUA Board Meeting has a final rule on this topic. How did we get here?

In May 2012 NCUA approved a final rule banning #creditunions from capitalization of interest on troubled debt restructurings (TDRs).

In November 2019 NCUA approved a proposed rule that removes the prohibition on the capitalization of interest in connection with loan workouts and modifications due to the pandemic.

The #NCUABoard determined that the current prohibition on interest capitalization might be overly burdensome and, in some cases, could hamper a credit union’s good-faith efforts to engage in loan workouts due to COVID.

They logically concluded allowing interest capitalization may avert the need for alternative actions that would be more harmful to borrowers.

While we don't yet know what changes might be made to the proposed rule, I expect the rule will:

1. Establish documentation requirements

2. Apply to workouts of all types of member loans, including commercial and business loans.

Reach out if you would like to talk about this or how I assist credit unions achieve the best possible exams so they save time and money.


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