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Loan Modifications Related to COVID-19

The Board of Governors of the Federal Reserve System along with other banking regulators issued an Interagency Statement on Loan Modifications (the Statement) on Sunday, March 22.

The Statement provides relief that allows banks to avoid reporting a loan as a Troubled Debt Restructuring (TDR). According to the Statement, the banking regulators have confirmed with the Financial Accounting Standards Board (FASB) that short-term modifications in response to COVID-19 that are made to loans that are current (i.e., less than 30 days past due at the time of modification) prior to any relief should not be reported by the bank as a TDR. Such short-term (e.g., six months) modifications may include payment deferrals, fee waivers, extensions of prepayment terms, or other delays in payment. The Statement allows the banks of impacted borrowers to provide payment relief in certain situations without having to suffer the regulatory and operating consequences that accompany a loan reported as a TDR. It also supplements statements released last week by regulators clarifying that examiners will not automatically adversely classify loans that are affected by COVID-19 and will not criticize prudent efforts made by banks to modify terms on such loans.

Based on the Statement, a borrower experiencing cash flow problems with respect to the COVID-19 crisis should reach out to any FDIC-insured lenders to see whether such modifications may be possible without adverse consequences to the bank or the borrower.

© 2020 Jones Walker LLPNational Law Review, Volume X, Number 85


About this Author

Mark Davis Partner Corporate Practice Group, real estate.

Mark draws on his more than 35 years of experience to help clients coordinate real estate developments and orchestrate transactions, including acquisition, leasing, and financing matters, as well as address zoning issues. His practice spans the development of shopping centers, office buildings, hotels, mixed-use facilities, hospital expansions, and manufacturing facilities. He also represents lenders in lending transactions and foreclosures.

Thomas Walker Jr Corporate Attorney Jones Walker Jackson, MS

Tom Walker is a partner in the Corporate Practice Group. He focuses on commercial and regulatory matters in the financial services industry, with a depth of experience representing financial institutions.

Prior to joining the firm, Tom served as executive vice president and director of a community bank in Forest, Mississippi. His experience as general counsel, chief operating officer, chief financial officer, and chief investments officer in the financial services sector enhances his ability to provide legal services to his clients.

Tom previously served as chairman of the Attorneys Committee of the Mississippi Bankers Association during the 2017-2018 fiscal year, and he currently serves as a member of that committee. He has also served as treasurer and member of the Executive Council of the Mississippi Young Bankers as well as a member of the Long Range Planning Committee and Banking Committee for the Mississippi Society of CPAs. He has been an active certified public accountant in Mississippi since 2001, and currently serves on the board of governors for the Mississippi Society of CPAs.