TDR Rule Brightens CUs Financials
Credit unions that have restructured loans for struggling members no longer have to pay the price on their financial performance reports. That’s because a final rule released in May by the NCUA, which applied GAAP standards to the reporting of delinquent restructured residential mortgage loans, included a provision that released credit unions from reporting troubled debt restructured loans as delinquent until the borrower had made six months’ worth of consecutive, on-time payments.
The rule brought NCUA up to speed with other financial regulators like the FDIC and Federal Reserve, which had been following GAAP standards that only required TDRs be reported as delinquent consistent with other loans.
“The effect–111 basis points–was substantial,” Waite said. “Because a lot of external parties weren’t as familiar with the NCUA’s rule, they thought we had a truly disastrous credit issue.”
After the NCUA enacted the six-month consecutive payment requirements for TDRs back in third-quarter 2009, Waite said he received a call from the Federal Reserve, questioning Patelco’s creditworthiness in regard to its line of credit with the Fed.