ng in June, commercial mortgage-backed securities (CMBS) will be eligible collateral under the Term Asset-Backed Securities Loan Facility (TALF), the Federal Reserve Board says. The board has also authorized TALF loans with maturities of five years. Currently, all TALF loans have maturities of three years. TALF loans with five-year maturities will be available for the June funding to finance purchases of CMBS, asset-backed securities (ABS) backed by student loans and ABS backed by loans guaranteed by the Small Business Administration. The board indicates that up to $100 billion of TALF loans could have five-year maturities and that it will continue to evaluate that limit. Some of the interest on collateral financed with a five-year loan may be diverted toward an accelerated repayment of the loan, especially in the fourth and fifth years. The Federal Reserve says inclusion of CMBS as eligible collateral for TALF loans will help prevent defaults on economically viable commercial properties, increase the capacity of current holders of maturing mortgages to make additional loans and facilitate the sale of distressed properties. CMBS accounted for almost half of new commercial mortgage originations in 2007. "Extending TALF to CMBS with five-year terms is critical to providing liquidity and facilitating lending in the commercial mortgage market," says Christopher Hoeffel, president of the Commercial Mortgage Securities Association, which has strongly advocated for the term extension. "A five-year term is more consistent with the longer-term nature of commercial lending and will provide more flexibility to borrowers as they navigate the current real estate cycle." SOURCES: Federal Reserv
