by Jim Gallagher

A Way Forward

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Many of you are overwhelmed with the effects of the pandemic on your family, your credit union, and your borrowers. Your focus on new loans and portfolio growth should now be turned to portfolio management and borrower relief. The NCUA through a 3/22/2020 Interagency Statement on Loan Modifications provides a bit of a roadmap for the foreseeable future.

The agencies have confirmed with the staff of the Financial Accounting Standards Board (FASB) that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief, are not TDRs. This includes short-term (e.g., six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented.

If you have not already done so you should be reaching out to all of your borrowers to ascertain the extent of the damage on their businesses and their plans to weather this potentially protracted event. The frequency of these borrower calls should correspond to the level of $ exposure. Lucro has a form to help guide these conversations and document your files. I would suggest you start first with Hospitality - the industry most severely impacted. Once you have a clearer idea of the borrower’s situation you can tailor a solution ranging from one month interest only to 6 months total deferment. You may also consider a combination of options such as 3 months of deferment that rolls into 3 additional months of interest only.

Lucro is providing a short form modification service for 90 days free of charge. This service is suitable for non-complex transactions. We can also prepare a more formal modification through Wolters Kluwer if needed. Credit unions with attorney prepared documents/files should consider re-engaging the Closing /Title provider for modification requests.

Just like the last financial disaster (12 years ago) this pandemic provides an opportunity to differentiate yourself from competitors. Providing relief to existing borrowers and entertaining credit requests from strong borrowers with manageable leverage present a great opportunity to demonstrate the credit union difference.

For a personalized demo contact Heather Bosenko at, 850-701-4073, or fill out the interest form below: