On June 29, the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, and the National Credit Union Administration (collectively, the agencies) issued a joint policy statement on commercial real estate loan workouts building on existing guidance calling for financial institutions to work “prudently and constructively” with distressed borrowers. The joint policy statement supersedes the agencies’ 2009 guidance.

The June 29th statement is substantially the same as the proposal the agencies issued last year save for two changes.

• It includes a section on short-term loan accommodations and recognizes that short-term accommodations may be an appropriate alternative prior to a longer-term or more complex workout arrangement.
  • “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 a financial challenge.”
• It addresses recent accounting changes for estimating loan losses (i.e., the implementation of the current expected credit losses (CECL) methodology) and provides examples of how to classify loans affected by workout activity.