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Alert: NCUA seeks new interest capitalization rules for loan workouts

December 7, 2020 Article 1 min read
Authors:
Ryan Abdoo Kenley Penner Kate Krones

The National Credit Union Administration (NCUA) has issued a proposal to remove restrictions on the capitalization of interest related to loan workouts and modifications for federally insured credit unions.

Businessman sitting at a desk using his cell phone taking a call while writing notes on a notepad.On December 4, the NCUA issued a proposal to remove restrictions on the capitalization of interest related to loan workouts and modifications. During their November 19 meeting in which they approved the proposal, the NCUA commented that the current restrictions may be overly burdensome and could reduce good-faith efforts to engage in loan workouts during the economic disruption of the COVID-19 pandemic. Under current regulatory guidance, banks are allowed to capitalize interest in these scenarios, subject to sound banking practices, while credit unions are not. The proposed rule is open for comment through Feb. 2, 2021.

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