By the Division of Banks

December 27, 2012


The attached guidance pdf format of tdrguidance.pdf
serves to clarify the position of the Division of Banks (Division) relative to the treatment of certain loan modifications for residential borrowers who are not delinquent but whose current loan balance exceeds the value of the property securing their loan. In response to several discussions with the industry, the Division undertook a review of existing Troubled Debt Restructuring (TDR) guidance. As part of this review, staff of the Division reviewed existing guidance issued by the Financial Accounting Standards Board (FASB), as well as guidance issued by the federal regulatory agencies. The Division determined that, in certain circumstances, a lender may choose to restructure or modify a residential loan per the revision in mortgage terms statute (Massachusetts General Laws chapter 183, section 63A) and that loan may not necessarily have to be treated as a TDR.

I am pleased to provide this guidance to financial institutions as they continue to work with their customers on financing options. This guidance allows institutions to consider the revision in terms provision for portfolio customers that are not delinquent as a way to both reward customers that pay on time and to provide further discretionary spending to help the economy continue to recover.

Should you have any questions relating to this letter or the attached guidance, please feel free to contact Senior Deputy Commissioner Jay P. Bienvenu at 617-956-1535 or at


David J. Cotney
Commissioner of Banks