The legislation would let banks postpone the start date of the Current Expected Credit Losses accounting standard and delay categorizing pandemic-related loan modifications as troubled debt restructurings.
Some lenders are poring over commercial portfolios more frequently than normal — perhaps as often as once a month — to uncover problems hidden by payment deferrals and government stimulus before it's too late.
Some homeowners who sought relief as a result of COVID-19 may owe a lump sum when their forbearance period ends, according to a report from the Committee for Better Banks. The group is calling on banks to instead extend the repayment periods for affected customers.
Measures designed to give banks and credit unions more flexibility to help customers weather the coronavirus pandemic are set to expire Dec. 31 unless Congress renews them.
More consumer and commercial borrowers are paying their loans, increasing the likelihood that charge-offs will be manageable for banks despite the ongoing pandemic.
Deferrals on residential mortgages and home-equity loans have been a common theme at JPMorgan Chase, Bank of America, Wells Fargo and Citigroup since the start of the coronavirus pandemic.
Mortgages taken out to fund business operations can now be modified in bankruptcy. That’s a relief to borrowers — particularly with business failures expected to increase as the pandemic drags on — but a possible headache for banks and investors that hold the loans.
Borrower relief is necessary in a national emergency, but if the exclusion of the deferred loans from troubled debt restructurings is extended past the end of the year, safety and soundness could be compromised.
