What if borrowers continue to experience financial difficulty as a result of COVID-19 near the end of the initial loan modification period?

On August 3, 2020, the FFIEC, on behalf of its members issued a joint statement to provide prudent risk management and consumer protection principles for financial institutions to consider while working with borrowers as loans near the end of the initial loan accommodation periods provided during the COVID-19 event.

• FFIEC members encourage financial institutions to consider prudent accommodation options that can ease cash flow pressures on affected borrowers, improve their capacity to service debt, and facilitate institutions’ ability to collect loans, consistent with applicable laws and regulations. Such arrangements may mitigate the long-term impact of a financial challenge on borrowers by helping to avoid delinquencies or other adverse consequences.
• Effective risk management includes providing clear, conspicuous, and accurate communications and disclosures to inform borrowers of affordable and sustainable accommodation options prior to the end of the accommodation period.

Joint Statement on Additional Loan Accommodations Related to COVID-19, August 3, 2020 https://www.ffiec.gov/press/PDF/Statement_for_Loans_Nearing_the_End_of_Relief_Period.pdf

Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised), April 7, 2020 FDIC FIL-36-2020 https://www.fdic.gov/news/financial-institution-letters/2020/fil20036.html