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Government Expands Financial Stability Act to Include CMBS

February 10, 2009

The Term Asset-Backed Securities Loan Facility (TALF) has been expanded to include commercial mortgage-backed securities (CMBS). The TALF is part of the Financial Stability Act being introduced today by Treasury Secretary Timothy Geithner this morning which seeks to address the frozen secondary markets for Asset-Backed Securities. The “fact sheet” for the program has been embedded below, but here are the excerpts which concern commercial real estate.

A Bold Expansion Up to $1 Trillion:

This joint initiative with the Federal Reserve builds off, broadens and expands the resources of the previously announced but not yet implemented Term Asset-Backed Securities Loan Facility (TALF). The Consumer & Business Lending

Initiative will support the purchase of loans by providing the financing to private investors to help unfreeze and lower interest rates for auto, small business, credit card and other consumer and business credit. Previously, Treasury was to use $20 billion to leverage $200 billion of lending from the Federal Reserve. The Financial Stability Plan will dramatically increase the size by using $100 billion to leverage up to $1 trillion and kick start lending by focusing on new loans.

and a little bit below that:

Expand Reach – Including Commercial Real Estate:

The Consumer & Business Lending Initiative will expand the initial reach of the Term Asset-Backed Securities Loan Facility to now include commercial mortgage-backed securities (CMBS). In addition, the Treasury will continue to consult with the Federal Reserve regarding possible further expansion of the TALF program to include other asset classes, such as non-Agency residential mortgage-backed securities (RMBS) and assets collateralized by corporate debt.

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