Unwinding the COVID-19 concessions for ‘secret CECL’

Most credit unions will feel the effects of CECL whether they have adopted it or not.

It has been nearly two years since the beginning of the COVID-19 pandemic. While concerns about new variants continue to make the news, American society seems to have progressed to a point of weariness with the pandemic and the continuing and still-changing restrictions by various levels of government.

In what may be an indication that the pandemic will soon be over, the National Credit Union Administration and the federal banking regulatory agencies are starting to roll back their COVID-related regulatory relief, which will change the compliance situation for credit unions. Get ready for the great sorting out of credit unions’ allowances for loan and lease losses as well as supervisory actions premised on US generally accepted accounting principles’ current expected credit losses—even if your credit union has not adopted it yet.

On Nov. 10, 2021, NCUA and the federal banking agencies issued a Joint Statement on Supervisory and Enforcement Practices Regarding the Mortgage Servicing Rules in Response of the Continuing COVID-19 Pandemic and the CARES Act. The substance of this issuance is to withdraw the same agencies’ related April 2020 joint statement to return the mortgage servicing rules to their pre-pandemic status. One practical effect of this issuance is that credit unions and other mortgage servicers must return to rigid adherence to the Consumer Financial Protection Bureau’s pre-pandemic loss mitigation procedures regulation. Financial institutions’ leeway to do workouts will be much more limited.


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