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Federal Register / Vol. 86, No. 123 / Wednesday, June 30, 2021 / Rules and Regulations is not expected to increase the cost burden for FICUs. Accordingly, the NCUA certifies that the final rule will not have a significant economic impact on a substantial number of small credit unions.
B. Paperwork Reduction Act The Paperwork Reduction Act of 1995
PRA 44 U.S.C. 3501 et seq. requires that the Office of Management and Budget OMB approve all collections of information by a Federal agency from the public before they can be implemented. Respondents are not required to respond to any collection of information unless it displays a valid OMB control number. In accordance with the PRA, the information collection requirements included in this final rule have been submitted to OMB
for approval under control number 31330092.
C. Executive Order 13132
Executive Order 13132 encourages independent regulatory agencies to consider the impact of their actions on state and local interests. In adherence to fundamental federalism principles, the NCUA, an independent regulatory agency as defined in 44 U.S.C. 35025, voluntarily complies with the executive order. This rulemaking will not have a substantial direct effect on the states, on the connection between the National Government and the states, or on the distribution of power and responsibilities among the various levels of government. The NCUA has determined that this final rule does not constitute a policy that has federalism implications for purposes of the executive order.

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D. Assessment of Federal Regulations and Policies on Families The NCUA has determined that this final rule will not affect family wellbeing within the meaning of Section 654
of the Treasury and General Government Appropriations Act, 1999.20
E. Small Business Regulatory Enforcement Fairness Act The Small Business Regulatory Enforcement Fairness Act of 1996
SBREFA 21 generally provides for congressional review of agency rules. A
reporting requirement is triggered in instances where the NCUA issues a final rule as defined by section 551 of the Administrative Procedure Act. An agency rule, in addition to being subject to congressional oversight, may also be 20 Public 21 5

Law 105277, 112 Stat. 2681 1998.
U.S.C. 551.

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subject to a delayed effective date if the rule is a major rule. The NCUA does not believe this rule is a major rule within the meaning of the relevant sections of SBREFA. As required by SBREFA, the NCUA will submit this final rule to OMB for it to determine if the final rule is a major rule for purposes of SBREFA. The NCUA also will file appropriate reports with Congress and the Government Accountability Office so this rule may be reviewed.
List of Subjects in 12 CFR Part 741
Credit, Credit unions, Share insurance.
By the National Credit Union Administration Board on June 24, 2021.
Melane Conyers-Ausbrooks, Secretary of the Board.

For the reasons discussed in the preamble, the Board amends 12 CFR
part 741 as follows:
PART 741REQUIREMENTS FOR
INSURANCE
1. The authority citation for part 741
continues to read as follows:

Authority: 12 U.S.C. 1757, 1766a, 1781
1790, and 1790d; 31 U.S.C. 3717.

2. Appendix B to Part 741 is revised to read as follows:

Appendix B to Part 741Loan Workouts, Nonaccrual Policy, and Regulatory Reporting of Troubled Debt Restructured Loans This Appendix establishes requirements for the management of loan workout 1
arrangements, loan nonaccrual, and regulatory reporting of troubled debt restructured loans herein after referred to as TDR or TDRs. This Appendix applies to all federally insured credit unions.
Under this Appendix, TDRs are as defined in generally accepted accounting principles GAAP, and the Board does not intend to change the Financial Accounting Standards Boards FASB definition of TDR in any way through this policy. In addition to existing agency policy, this Appendix sets the NCUAs supervisory expectations governing loan workout policies and practices and loan accruals.
Written Loan Workout Policy and Monitoring Requirements 2
For purposes of this Appendix, types of workout loans to borrowers in financial difficulties include re-agings, extensions, 1 Terms defined in the Glossary will be italicized on their first use in the body of this =Appendix.
2 For additional guidance on commercial and member business lending extension, deferral, renewal, and rewrite policies, see Interagency Policy Statement on Prudent Commercial Real Estate Loan Workouts October 30, 2009
transmitted by Letter to Credit Unions No. 10CU
07, and available at http www.ncua.gov.

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deferrals, renewals, or rewrites. See the Glossary entry on workouts for further descriptions of each term. Borrower retention programs or new loans are not encompassed within this policy nor considered by the Board to be workout loans.
A credit union can use loan workouts to help borrowers overcome temporary financial difficulties such as loss of job, medical emergency, or change in family circumstances such as the loss of a family member. Loan workout arrangements must consider and balance the best interests of both the borrower and the credit union.
The lack of a sound written policy on workouts can mask the true performance and past due status of the loan portfolio.
Accordingly, the credit union board and management must adopt and adhere to an explicit written policy and standards that control the use of loan workouts, and establish controls to ensure the policy is consistently applied. The loan workout policy and practices should be commensurate with a credit unions size and complexity, and must conform with a credit unions broader risk mitigation strategies.
The policy must define eligibility requirements that is, under what conditions the credit union will consider a loan workout, including establishing limits on the number of times an individual loan may be modified.3 The policy must also ensure credit unions make loan workout decisions based on a borrowers renewed willingness and ability to repay the loan. If a credit union restructures a loan more frequently than once a year or twice in five years, examiners will have higher expectations for the documentation of the borrowers renewed willingness and ability to repay the loan. The NCUA is concerned about restructuring activity that pushes existing losses into future reporting periods without improving a loans collectability. One way a credit union can provide convincing evidence that multiple restructurings improve collectability is to validate completed multiple restructurings that substantiate the claim.
Examiners will ask for such validation documentation if a credit union engages in multiple restructurings of a loan.
In addition, the policy must establish sound controls to ensure loan workout actions are appropriately structured.4 The 3 Broad based credit union programs commonly used as a member benefit and implemented in a safe and sound manner limited to only accounts in good standing, such as Skip-a-Pay programs, are not intended to count toward these limits.
4 In developing a written policy, the credit union board and management may wish to consider similar parameters as those established in the FFIECs Uniform Retail Credit Classification and Account Management Policy FFIEC Policy. 65 FR
36903 June 12, 2000 https www.govinfo.gov/
content/pkg/FR-2000-06-12/pdf/00-14704.pdf. The FFIEC Policy sets forth specific limitations on the number of times a loan can be re-aged for openend accounts or extended, deferred, renewed or rewritten for closed-end accounts. NCUA Letter to Credit Unions LCU 09CU19, Evaluating Residential Real Estate Mortgage Loan Modification Programs, also outlines policy best practices for real estate modifications https www.ncua.gov/
regulation-supervision/letters-credit-unions-other-

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