Ten months ago, who would have thought there would be pandemic-related mask ordinances, splash guards at teller windows, and social distance decals on the floors of branch lobbies?
The only constant has been credit unions’ commitment to doing what they do best: assisting and serving their members.
In addition, regulators have issued a seeming onslaught of agency guidance and regulatory changes since the beginning of the coronavirus (COVID-19) pandemic. Although we can’t predict what may be in store in the coming months, here’s a snapshot of issues to consider as we try to get through the end of 2020.
NCUA’s exam posture remains as it was since the start of the pandemic, with most exams occurring off-site and materials shared electronically and securely.
At the beginning of 2020, NCUA announced one of its priorities would be the review of credit union loan programs and underwriting standards and procedures. As a result of the pandemic, NCUA instead shifted the emphasis to reviewing actions credit unions have taken to assist members facing financial difficulties.
Credit unions may be experiencing an uptick in examiner requests for policy reviews and the use of loan workout strategies. Of interest are credit unions’ risk management controls and how credit unions are assisting those experiencing financial hardships due to the pandemic.
Based on NCUA exam guidance and interagency statements, the agency is encouraging credit unions to prudently work with borrowers. From the onset of the pandemic, guidance stated that well-structured loan accommodations in this environment are to be viewed as positive actions to mitigate the adverse effects COVID-19 is having on borrowers and facilitate a credit union’s ability to collect on its loans.
These agency issuances offer prudent risk management and consumer protection practices and guidance on meeting accounting and regulatory reporting requirements. They also stress the importance of sound internal controls in this current environment.
So, let’s talk additional accommodations. Now that we’re approximately 10 months into the pandemic, many of the accommodations provided to members are nearing or at their end.
While some member borrowers are in a reasonable capacity to repay and can resume payments, others, unfortunately, cannot. They’re likely feeling the pressure of looming payments and realizing they’ll likely face continued financial hardship for the foreseeable future.
A Federal Financial Institutions Examination Council (FFIEC) joint statement issued in August addressed additional loan accommodations for borrowers. Following are some issues to consider.
NEXT: Communications to the borrower