Bloomberg
Fed Extends TALF Program for Commercial Real Estate (Update2)
written by Scott Lanman
August 17, 2009
Aug. 17 (Bloomberg) -- The Federal Reserve extended by three to six months an emergency program aimed at restarting credit markets, a move that may cushion the commercial real- estate industry from rising defaults and falling prices.
The Term Asset-Backed Securities Loan Facility (TALF), with a capacity of as much as $1 TRILLION, will expire June 30, 2010 for newly issued commercial mortgage-backed securities, instead of Dec. 31, 2009, the Fed and U.S. Treasury said today in a statement in Washington. For other asset-backed securities and CMBS sold before Jan. 1, the plan was extended three months to March 31.
Commercial property values have fallen 35 percent since peaking in October 2007, according to Moody’s Investors Service. The extension may help firms such as Vornado Realty Trust, which is considering the sale of commercial mortgage backed securities (CMBS) through the TALF. Almost $165 billion of mortgages for skyscrapers, shopping malls and hotels are due this year.
While financial-market conditions “have improved considerably in recent months,” the markets for Asset Backed Securities (ABS) and Commercial Mortgage Backed Securities (CMBS) “are still impaired and seem likely to remain so for some time,” the Fed and Treasury said.
The central bank said it doesn’t intend to make other types of collateral eligible for the program, indicating officials rejected adding residential mortgage-backed securities after considering such a move for several months. The Fed didn’t rule out a future expansion.
The Fed began the TALF in March to restart the market for securities backed by auto, credit-card and education loans. In June, the Fed expanded the program to cover as much as $100 billion in loans to support commercial mortgage-backed securities.
Under the plan, the Fed lends to investors to purchase new asset-backed securities as well as commercial real-estate debt.
Citigroup Inc., Ford Motor Co. and JPMorgan Chase are among companies that have sold auto and credit-card debt through the TALF. Brookfield Properties Corp. is “thinking about” using the emergency program, Chief Executive Officer Richard Clark said July 29.
Also, 41 House members -- including Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, and Carolyn Maloney, a New York Democrat who heads the Joint Economic Committee -- signed a July 31 letter to Bernanke seeking a one-year extension through December 2010 and asking for a decision by mid-August.
New York Fed President William Dudley said in June that “there’s a huge administrative hurdle” to expanding TALF to cover residential Mortgage Backed Securities (MBS) because each security is different and must be separately evaluated for the size of the haircut that should be applied. The haircut is how much capital investors put up for the Fed loan.
Separately, the Fed is buying as much as $1.25 trillion of residential Mortgage Backed Securities (MBS) this year to lower interest rates in housing.
Please click HERE to read the entire article...
Fed Extends TALF Program for Commercial Real Estate (Update2)
written by Scott Lanman
August 17, 2009
Aug. 17 (Bloomberg) -- The Federal Reserve extended by three to six months an emergency program aimed at restarting credit markets, a move that may cushion the commercial real- estate industry from rising defaults and falling prices.
The Term Asset-Backed Securities Loan Facility (TALF), with a capacity of as much as $1 TRILLION, will expire June 30, 2010 for newly issued commercial mortgage-backed securities, instead of Dec. 31, 2009, the Fed and U.S. Treasury said today in a statement in Washington. For other asset-backed securities and CMBS sold before Jan. 1, the plan was extended three months to March 31.
Commercial property values have fallen 35 percent since peaking in October 2007, according to Moody’s Investors Service. The extension may help firms such as Vornado Realty Trust, which is considering the sale of commercial mortgage backed securities (CMBS) through the TALF. Almost $165 billion of mortgages for skyscrapers, shopping malls and hotels are due this year.
While financial-market conditions “have improved considerably in recent months,” the markets for Asset Backed Securities (ABS) and Commercial Mortgage Backed Securities (CMBS) “are still impaired and seem likely to remain so for some time,” the Fed and Treasury said.
The central bank said it doesn’t intend to make other types of collateral eligible for the program, indicating officials rejected adding residential mortgage-backed securities after considering such a move for several months. The Fed didn’t rule out a future expansion.
The Fed began the TALF in March to restart the market for securities backed by auto, credit-card and education loans. In June, the Fed expanded the program to cover as much as $100 billion in loans to support commercial mortgage-backed securities.
Under the plan, the Fed lends to investors to purchase new asset-backed securities as well as commercial real-estate debt.
Citigroup Inc., Ford Motor Co. and JPMorgan Chase are among companies that have sold auto and credit-card debt through the TALF. Brookfield Properties Corp. is “thinking about” using the emergency program, Chief Executive Officer Richard Clark said July 29.
Also, 41 House members -- including Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, and Carolyn Maloney, a New York Democrat who heads the Joint Economic Committee -- signed a July 31 letter to Bernanke seeking a one-year extension through December 2010 and asking for a decision by mid-August.
New York Fed President William Dudley said in June that “there’s a huge administrative hurdle” to expanding TALF to cover residential Mortgage Backed Securities (MBS) because each security is different and must be separately evaluated for the size of the haircut that should be applied. The haircut is how much capital investors put up for the Fed loan.
Separately, the Fed is buying as much as $1.25 trillion of residential Mortgage Backed Securities (MBS) this year to lower interest rates in housing.
Please click HERE to read the entire article...
No comments:
Post a Comment