Alert: NCUA seeks new interest capitalization rules for loan workouts

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.