The Federal Financial Institutions Regulatory Agencies have jointly issued a final policy statement on commercial real estate loan accommodations and workouts. The updates reinforce and build on existing supervisory guidance that calls for financial institutions to work prudently and constructively with creditworthy borrowers in times of financial stress. The policy statement was issued jointly by the FDIC, the Federal Reserve, the National Credit Union Administration and the Office of the Comptroller of the Currency.
The 90-page statement is substantially similar to a proposal published in 2022 and includes minor changes in response to comments. Updates and supersedes previous guidelines on commercial real estate loan workouts issued in 2009.
The statement includes a section on short-term loan accommodations that was not included in the previous guide. As defined in the Statement, an accommodation includes an agreement to defer one or more payments, make a partial payment, or provide other assistance or relief to a borrower who is experiencing financial difficulty.
In addition, the statement addresses recent accounting changes for estimating loan losses and provides examples of how to classify and account for loans affected by workout activity. It also includes updates to Appendix 2 of the 2009 Statement, which contains a summary of selected references to supervisory guidance and accounting standards relevant to real estate loans, appraisals, restructured loans, fair value measurement and reporting matters regulatory
Finally, it includes several hypothetical examples of CRE loan execution agreements in different scenarios, with revisions and additions to the examples provided in 2009.
