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Guidance on Storm Damage, Consumer Impact, and Loans

The California Department of Financial Protection and Innovation (DFPI) has issued important storm damage guidance for California financial institutions and its measured response regarding delinquent loans, non-performing loans, and troubled debt restructures (TDRs):

This guidance is directed to financial institutions, lenders, and mortgage servicers in California whose customers may be experiencing financial hardship as a result of recent severe winter storms, flooding, and landslides. The Department of Financial Protection and Innovation recognizes the serious impact to borrowers in communities affected by these natural disasters and encourages lenders and servicers to work with these customers to meet their financial needs.

On January 4, 2023, Governor Gavin Newsom proclaimed a state of emergency in California as a result of the winter storms. These storms caused flooding, closure and damage to roadways, power outages, damage to structures, and mandatory evacuations in certain counties. On January 9, 2023, President Joseph Biden, Jr., declared that an emergency exists in California.

The Commissioner encourages financial institutions, lenders, and servicers to work constructively with their customers and propose solutions to meet their lending needs as the recovery continues. Such solutions may include offering payment accommodations, such as deferrals or extensions, and loan modifications to the rate or term. Prudent efforts to modify or restructure the terms of loans will not be criticized by examiners.

Furthermore, the Commissioner acknowledges that some licensees may experience an increase in delinquent or nonperforming loans and troubled debt restructures as a result of the financial impact to borrowers cause by the severe storm activity. The Commissioner will consider such increases in adversely classified assets within the context of the state of emergency, and supervisory responses will be measured and appropriate. The Commissioner supports and will not criticize efforts to accommodate customers in a safe and sound manner.

This guidance does not modify any existing law or regulation.

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