Fed Closes Door on Legacy CMBS Program

The Federal Reserve Bank of New York settled $857m in commercial mortgage-backed securities (CMBS) in its last round of loan requests under the Term Asset-Backed Securities Loan Facility (TALF). The Fed created TALF to help the market provide credit to households and small businesses by supporting the issuance of asset-backed securities (ABS) collateralized by many different loans including residential and commercial mortgages. The Fed settled roughly $12bn in legacy loan requests since the TALF launched in June 2009. It settled the second fewest amount in March. It reached its peak in August, when the Fed settled $2.1bn in legacy loan requests. The Fed denied the most requests in March. During the last month of the program, more than $1.2bn requests arrived, totaling $402m in denials and the largest amount of any month. Ben Bernanke, chairman of the Federal Reserve, noted in a speech to the House of Representatives Committee on Financial Services that TALF extends three- and five-year loans that remain outstanding after the program closed. These loans get an extra three months. The later closing, he said, echoes concerns that the sector remains “highly stressed.” The commercial real estate industry adopted this “pretend and extend” strategy for troubled loans to give enough time hungry investors to bring capital back into the market, according Robert O’Brien, US Real Estate Leader at consultancy firm Deloitte. In a sign that at least some private capital is making its way back to small businesses, CIT Group (CIT) closed a new $1bn committed US Vendor Finance conduit facility with Barclays Bank (BCS) as the administrative agent. Three other banks also committed to the facility. It will supplement the recently closed $667m in TALF eligible securitization that financed assets originated under Vendor Finance. The revolving period of the facility expires in March 2011 and has a final maturity in 2018. Write to Jon Prior. The author holds no relevant investments.

Most Popular Articles

3d rendering of a row of luxury townhouses along a street

Log In

Forgot Password?

Don't have an account? Please