Guidance issued to help banks deal with borrowers in California’s fire-ravaged areas

Financial institutions serving areas affected by wildfires in California were given guidance Friday to help the areas recover, particularly by easing lending terms where possible.

In Financial Institution Letter (FIL) 52-2017, the Federal Deposit Insurance Corp. (FDIC) encourages banks to work constructively with borrowers experiencing difficulties beyond their control because of damage caused by the wildfires.

“Extending repayment terms, restructuring existing loans, or easing terms for new loans, if done in a manner consistent with sound banking practices, can contribute to the welfare of the local community and serve the long-term interests of the lending institution,” the letter states. The FDIC, in the letter, also said it would consider regulatory relief from certain filing and publishing requirements.

Additionally, the letter points out that banks may receive favorable Community Reinvestment Act (CRA) consideration for community development loans, investments, and services in support of disaster recovery.

A federal disaster for selected areas in California – particularly in Napa, Sonoma and Mendocino Counties — was declared on Oct. 10; FDIC said additional designations may be made after damage assessments are completed in the affected areas.

Guidance to Help Financial Institutions and to Facilitate Recovery in Areas of California Affected by Wildfires