Saturday, May 2, 2009

Fed Expands Eligible Collateral Under Term Asset-Backed Securities Loan Facility

The Federal Reserve Board on Friday announced that, starting in June, commercial mortgage-backed securities (CMBS) and securities backed by insurance premium finance loans will be eligible collateral under the Term Asset-Backed Securities Loan Facility (TALF).

Expansion this late in the game suggests to me that they are protecting specific entities that are holding sizable chunks of this kind of paper.

And as if to emphasise that TALF is not going away any time soon the Fed announced that it 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, ABS backed by student loans, and ABS backed by loans guaranteed by the Small Business Administration. The Fed indicated that up to $100 billion of TALF loans could have five-year maturities.

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