Troubled Debt Restructuring, Loan Workout and Nonaccrual Policy Template

Description

This comprehensive Troubled Debt Restructuring, Loan Workout and Nonaccrual Policy Template is an essential tool for credit unions seeking to establish robust guidelines for managing distressed loans and maintaining regulatory compliance. The template provides a detailed framework for identifying, evaluating, and implementing loan modifications, restructurings, and workouts while ensuring adherence to accounting standards and regulatory requirements.

The policy covers key aspects of troubled debt restructuring, including criteria for identifying troubled debt restructurings, methods for evaluating borrower financial condition, and procedures for implementing loan modifications. It outlines specific guidelines for various types of loan workouts, such as interest rate reductions, term extensions, and principal forgiveness.

The template also addresses nonaccrual loan policies, providing clear instructions for placing loans on nonaccrual status, recognizing interest income, and returning loans to accrual status. It includes guidance on the proper accounting treatment for troubled debt restructurings and nonaccrual loans, ensuring compliance with Generally Accepted Accounting Principles (GAAP) and regulatory reporting requirements.

This customizable document incorporates best practices for risk management, including procedures for ongoing monitoring of modified loans, documentation requirements, and reporting processes. It also covers the roles and responsibilities of various departments and personnel involved in the troubled debt restructuring and loan workout processes.

The policy template is designed to be easily adaptable to your credit union’s specific needs and risk appetite. It includes placeholders for institution-specific information and allows for customization of thresholds, approval levels, and other key parameters.

By implementing this comprehensive policy, credit unions can effectively manage troubled loans, mitigate credit risk, and maintain compliance with regulatory expectations. The template serves as a valuable resource for credit union management, lending staff, and board members, providing a clear and consistent approach to handling troubled debt restructurings and nonaccrual loans.