New CRE Loan Workout Rules Provide Relief and Pitfalls
On October 30, 2009, all of the federal regulatory agencies issued a new policy statement on commercial real estate (“CRE”) loan workouts. The policy statement does offer opportunities for financial institutions (“FI”) to reduce the amount of charge-offs on CRE loans, return restructured loans to a performing status faster and generally work with customers on mutually beneficial workouts. Nonetheless, the policy statement does present challenges before FIs can achieve such results, especially for those management teams seeking to “kick the can down the road” to await better days. Notably, however, the policy statement does not change regulatory reporting guidelines or the accounting requirements under generally accepted accounting principles (“GAAP”).
