Capitalization of interest rule for credit unions effective July 30

A final rule adopted June 24 to permit credit unions to extend financing of interest in connection with loan workouts and modifications is set to take effect July 30, according to a notice Wednesday in the Federal Register.

Besides removing the prohibition on the capitalization of interest, the final rule also sets documentation requirements to help ensure that the addition of unpaid interest to the principal balance of a mortgage loan does not hinder the borrower’s ability to become current on the loan, the notice states, and makes technical changes. The final rule, adopted without change from the proposal, is similar to rules in place for banks.

Reg lookup: Capitalization of Interest in Connection with Loan Workouts and Modifications