3
volume of section 4013 loans. Data about section 4013 loans may be collected for supervisory
purposes. Institutions do not need to determine impairment associated with certain loan
concessions that would otherwise have been required for TDRs (e.g., interest rate concessions,
payment deferrals, or loan extensions). For the most recent information on reporting
requirements for section 4013 loans, refer to the Federal Financial Institutions Examination
Council Instructions.
7
Accounting for other Loan Modifications Not under Section 4013
There are circumstances in which a loan modification may not be eligible under Section 4013 or
in which an institution elects not to apply Section 4013. For example, a loan that is modified
after the end of the applicable period would not be eligible under Section 4013. For such loans,
the guidance below applies.
Modifications of loan terms do not automatically result in TDRs. According to ASC Subtopic
310-40, a restructuring of a debt constitutes a TDR if the creditor, for economic or legal reasons
related to the debtor’s financial difficulties, grants a concession to the debtor that it would not
otherwise consider.
8
The agencies have confirmed with staff of the Financial Accounting
Standards Board (FASB)
9
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 under ASC
Subtopic 310-40. This includes short-term (e.g., six months) modifications such as payment
deferrals, fee waivers, extensions of repayment terms, or delays in payment that are
insignif ic ant.
10
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.
Accordingly, working with borrowers who are current on existing loans, either individua lly or as
part of a program for creditworthy borrowers who are experiencing short-term financial or
operational problems as a result of COVID-19 generally would not be considered TDRs. More
specifica lly, financial institutions may presume that borrowers are not experiencing financial
difficulties at the time of the modification for purposes of determining TDR status, and thus no
further TDR analysis is required for each loan modification in the program, if:
• The modification is in response to the National Emergency;
Schedule HC-N, Memoranda item 1, and for credit unions, NCUA Form 5300 Loans & Leases Schedule and on
Schedule A.
7
Refer to www.ffiec.gov for FFIEC Instructions.
8
The TDR designation is an accounting categorization, as promulgated by the FASB and codified within
Accounting Standards Codification (ASC) Subtopic 310-40, Receivables – Troubled Debt Restructurings by
Creditors (ASC Subtopic 310-40).
9
FASB Statement on Prudential Regulatory Guidance Concerning Troubled Debt Restructurings.
10
According to ASC Subtopic 310-40, factors to be considered in making this determination, which could be
qualitative, are whether the amount of delayed restructured payments is insignificant relative to the unpaid principal
or collateral value of the debt, thereby resulting in an insignificant shortfall in the contractual amount due from the
borrower, and whether the delay in timing of the restructured payment period is insignificant relative to the
frequency of payments due under the debt, the debt’s original contractual maturity, or the debt’s original expected
duration.