Thursday, April 9, 2020

Fed Announces Additional TALF Measures – Includes CMBS

On April 9, 2020, the Federal Reserve announced additional measures to support the economy amounting to as much as $2.3 trillion in liquidity. Among their actions, the Term Asset-Backed Securities Loan Facility (TALF) will now include legacy commercial mortgage-backed securities (CMBS) as eligible collateral. Eligible CMBS securities must have been issued prior to March 23, 2020, while securities related to other asset classes are only eligible if they were issued after this date.

According to Lisa Pendergast, Executive Director of the CRE Finance Council, “The acceptance of existing CMBS securities is an important step in the recovery of our market and economy as the $4.5 trillion commercial real estate market represents some 18% of GDP, and thus will play an important role in the U.S. recovery from COVID 19. We know that TALF 1.0 had an immediate and positive impact on restoring stability to the CMBS market and that the recovery in the secondary market was imperative in order to restart CMBS lending and issuance.”

TALF Specifics for CRE
The TALF term sheet specifies the following for the commercial and multifamily real estate loan/securities markets:
  1. The underlying credit exposures for CMBS must be to real property located in the United States or one of its territories; 
  2. CMBS securities related to single-asset single-borrower (SASB) and commercial real estate collateralized loan obligations (CRE CLOs) are not eligible at this time. 
TALF provides three-year loans to investors of CMBS and other eligible collateral. Haircuts and other terms can be found on the Fed’s website

CREFC will continue to work with the Federal Reserve and Treasury to update them of the status of our markets and highlight the benefits of adding new issue CMBS, SASB CMBS, and CRE CLOs. To that point, CREFC will be sending a letter to the Federal Reserve and Treasury this morning advocating for the inclusion of CRE CLOs into TALF.

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