Agencies Update CRE Loan Workout Guidance

The Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corp. and the National Credit Union Administration in consultation with state bank and credit union regulators, published on June 29 the final policy statement on Prudent Commercial Real Estate Loan Accommodations and Workouts. This bulletin rescinds the 2009 bulletin, Commercial Real Estate Loans: Guidance on Prudent CRE Loan Workouts.

The updated policy statement builds on existing guidance that calls for banks to work prudently and constructively with creditworthy borrowers during times of financial stress. It includes new information on short-term loan accommodations, addresses relevant accounting changes on estimating loan losses and provides examples on how to classify and account for loans modified or affected by loan accommodations or loan workout activity.

Appraisal Institute Professionals are encouraged to review the policy statement, as it represents a summary of existing requirements and guidance on CRE loan workout collateral valuation expectations, including appraisal and evaluation documentation and appraisal review expectations. AI intends to host a web briefing on this matter, which should be available for viewing on AI’s YouTube channel later this summer.