Policy Issues

Roundtable Urges Further Economic Stabilization by Encouraging Financial Institutions to Work Constructively with All Borrowers Affected by COVID-19

May 15, 2020

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This week, The Roundtable along with 11 industry groups wrote to Jerome Powell, Chairman Board of Governors of the Federal Reserve; Joseph M. Otting, Comptroller Office of the Comptroller of the Currency; and Jelena McWilliams, Chair of the Federal Deposit Insurance Corporation requesting clarification that the guidance in the Statement (April 6, 2020) allows financial institutions to work prudently with all creditworthy borrowers and to exercise discretion in modifying terms of lending arrangements with those borrowers consistent with safe and sound banking practices.

Our focus is the debt financing extended by commercial banking institutions to non-bank lenders (NBLs) who, in turn, provide mortgage loan funding to commercial and multifamily property owners of all types. The financing provided by such commercial banking institutions to NBLs generally takes the form of warehouse lines of credit and repurchase agreements, which are collateralized by the mortgage loans originated by the NBLs and the commercial mortgage-related securities held in their portfolios, and are subject to mark-to-market protocols.

Specifically, we request clarification that, in addition to traditional loan products, lending and financing arrangements, such as warehouse lines and repurchase agreements secured by multifamily and commercial real estate loans and commercial mortgage-related securities, are within the scope of the guidance in the Statement.

Therefore, as commercial banks consider short-term modifications and forbearance on loans secured by commercial and multifamily assets, it would be helpful for federal banking regulators to clarify that, in accordance with recent regulatory directives and the guidance in the Statement, that agency examiners will not criticize commercial banks that apply similar standards to modifications and forbearance on warehouse lines of credit, repurchase agreements, and other extensions of credit to creditworthy NBL borrowers.