Think clarity and timing. Be clear and accurate in communications and disclosures regarding additional accommodations/options available to the borrower that are affordable and sustainable (a reasonable capacity to repay).
Communications should provide ample time for both the borrower and credit union to consider next steps, and should occur well in advance of the prior accommodation terminating.
Based on NCUA’s COVID-19 exam specific resources, when granting loan modifications, credit unions should clearly explain to the borrower how the payments will be handled going forward. Providing clear and accurate disclosures can assist in preventing and avoiding misunderstandings relevant any change in terms, especially during this turbulent time.
Make sure that any exceptions to policies or procedures reflect the accommodations and/or options the credit union offers. The exceptions should be consistent with applicable laws and regulations.
Recent updates to NCUA’s Exam Manual online, specifically relating to COVID-19, acknowledge that credit unions may need to make exceptions to their policies, and that the board of directors should approve any policy exceptions.
NCUA’s Regulation Part 741 applies to all federally insured credit unions, with 741.3(b)(2) and Appendix B to Part 741 providing the regulatory framework for loan modification programs.
The COVID-19 section in NCUA’s exam manual provides that credit unions should address these elements in a loan workout policy:
Underwriting standards should include: