Yesterday, the Federal Reserve announced it was pumping more money into the beleaguered US economy: an additional $ 2.3 trillion that would commit hundreds of billions of dollars in loans to midsize businesses, along with much-needed support to states and large counties. This new stimulus also includes support for CMBS, as the Term Asset Backed Securities Lending Facility (TALF) will now include old CMBS as eligible collateral, according to CRE’s Financial Council. Eligible CMBS securities must have been issued before March 23, 2020, while securities linked to other asset classes are only eligible if they were issued after this date.
Last month the Fed started to buy CMBS issued by GSEs, marking a first for the Fed’s open market operations. But this support did not extend to private label CMBS.
This latest Fed move is an important step in the market’s recovery, according to Lisa Pendergast, executive director of the CRE Finance Council. Referring to a similar Fed facility put in place during the financial crisis ten years ago, she said that TALF 1.0 had an immediate and positive impact on restoring the stability of the CMBS market “and that the recovery secondary market was imperative to restart CMBS. loan and issue.
TALF’s expanded list of conditions requires that the underlying credit exposures for CMBSs be real estate located in the United States or one of its territories. In addition, CMBS securities linked to loan obligations guaranteed by a single borrower to a single asset and commercial real estate are not eligible at this time, according to the CREFC. He says he will recommend the Federal Reserve and Treasury to include CRE CLOs in TALF.