TDR (Troubled Debt Restructure) Overview

 CU*BASE calls TDR’s ‘Classification Codes’.

 The first step is to define the Classification Codes your credit union will be using and enter a Reserve % (if desired).

• You will define your Classification Codes using Tool # 459: Loan Classification Code Configuration. 

Specifics: It is the understanding of most credit unions that ANY bankrupt account that is not written or charged off but still in your Trial Balance should be coded as a TDR.

Bankruptcy

If you are not writing off the account, you will use Tool # 507: Member Refinances/Extensions to make any and all changes to the original contract as demanded by the court in the final document.

• The two Codes you should have for sure are Chapter 13 and Chapter 7
• You can refer to the CBO Bankruptcy Best Practices for more detail

Anything Other Than Bankruptcy

Any time an accounts original loan document is changed, you will always use Tool # 507: Member Refinances/Extensions unless it is a complete refinance where you pay off the existing loan with a new contract.

This will require a Subsequent Action Form that will need to be completed and signed by the member.

• You might have several Classification Codes for these types of TDR’s

 

Some credit unions, depending on their Loan Portfolio, will have Classification Codes for Mortgage Refinances by year of mortgage. This is needed for mortgages and other mortgage loans. (See example from one credit union below)

Other than Mortgages, there isn’t really a need to have multiple Classification Codes. However, any credit union can set as many codes as they wish.

• An example of a good Consumer Code would be TDR Consumer Loans

Classifying the Loan as a TDR

You will assign the loan a TDR Classification Code using Tool # 900: Update Loan Classification Code on Acct until it is paid out or charged off.

 If the code needs to be changed to a different code later, use Tool # 210: Classified Loan Review.

• This will allow you to review the loan and work in that queue rather than the collections queue.

Reports

Tool # 656: Loan Classification Report will produce a report showing all loan accounts which have been flagged with a Loan Classification Code.

• You can sort by account, Classification Code, or Loan Category

 Key Points

• Remember, you can set up any way you like but Bankruptcy and Refinances must be coded.
• If you refinance, (change interest or payment temporarily) then you must have reports for at least 6 months. Then if the account is ready to go back to the original contract, you may take off the Classification Code.
• CU*BASE has what you need to keep up with reporting and flagging these accounts. Your policy and procedures should be vetted by your auditor and or examiner.