Institutions that work with borrowers negatively affected by the coronavirus pandemic will not be directed to categorize loan modifications as troubled debt restructurings (TDRs), U.S. financial regulators said in an interagency statement Sunday.
"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," the regulators said. "This includes short-term — for example, six months — modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant."
The joint statement was issued by the Federal Reserve, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency, Consumer Financial Protection Bureau, National Credit Union Administration and the Conference of State Bank Supervisors.
"Examiners will exercise judgment in reviewing loan modifications, including TDRs, and will not automatically adversely risk rate credits that are affected, including those considered TDRs," the organizations said.
Regardless of whether modifications are considered TDRs or are adversely classified, the groups said agency examiners "will not criticize prudent efforts to modify terms on existing loans for affected customers."
Meanwhile, the Fed announced Monday it would purchase more Treasury and mortgage-backed securities, as the agency continues to use its tools to help quell the virus's impact on the economy.
The agency said it would establish two facilities to support credit to large employers — the Primary Market Corporate Credit Facility for new bond and loan issuance and the Secondary Market Corporate Credit Facility to provide liquidity for outstanding corporate bonds. A third facility, the Term Asset-Backed Securities Loan Facility, will support the flow of credit to consumers and businesses.
The regulator said it would provide $300 billion in new financing to support the flow of credit to employers, consumers and businesses.
The Fed said it also plans to announce the establishment of a Main Street Business Lending Program to support lending to eligible small and medium-sized businesses.
"The coronavirus pandemic is causing tremendous hardship across the United States and around the world," the Fed said in a statement. "Our nation’s first priority is to care for those afflicted and to limit the further spread of the virus.
"While great uncertainty remains, it has become clear that our economy will face severe disruptions," the regulator added. "Aggressive efforts must be taken across the public and private sectors to limit the losses to jobs and incomes and to promote a swift recovery once the disruptions abate."