Earlier this week the Federal Reserve announced that as of July 1, 2009, the Term Asset-Backed Securities Loan Facility ("TALF") program will accept certain high-quality commercial mortgage-backed securities ("CMBS") issued before January 1, 2009 (the so-called "legacy" securities). The expansion is intended to help restart the market for legacy securities and thereby stimulate the availability of new credit by helping to ease balance sheet pressures on banks and other financial institutions.
The TALF was initially authorized in November 2008 and has extended loans secured by AAA-rated newly-issued asset-back securities that are backed by certain consumer and business loans and leases. Earlier this month the Federal Reserve Board announced that it would expand the range of acceptable TALF collateral to include newly-issued CMBS (see posts on May 11 & May 15 for additional discussion of that announcement).
To be eligible as collateral for TALF loans, legacy CMBS must meet specified criteria designed to protect the Fed and the U.S. Treasury from inordinate credit risk, including having senior priority to all other interests in the underlying pool of commercial mortgages. New and revised term sheets and frequently-asked-questions documents with respect to legacy and newly issued CMBS and the TALF program are available at www.newyorkfed.org.
