On March 17, the Federal Reserve Bank of New York (FRBNY) released a revised set of Frequently Asked Questions in connection with the Term Asset-Backed Securities Lending Facility (TALF), and on March 19, the FRBNY announced that the list of eligible collateral for TALF’s April subscription will be expanded to include asset-backed securities (ABS) backed by residential mortgage servicing advances, business equipment loans or leases, auto fleet leases and floorplan loans. The changes detailed by the revised FAQs include: (i) primary dealers may submit names of prospective borrowers to the FRBNY for a pre-certification review in advance of the subscription date; (ii) if a borrower is deemed ineligible between the subscription date and the settlement date, the primary dealer may borrow from the Primary Dealer Credit Facility, or in certain cases, from the TALF facility; (iii) clarifications regarding variable funding notes; (iv) clarifications regarding primary dealers’ responsibilities for the accuracy of offering materials and to their duty of “reasonable care” regarding collateral eligibility determinations; (v) ABS trusts may use interest rate swaps to create floating-rate securities based off of fixed-rate receivables provided the swap agreements are entered into at fair prices.  

For more information about TALF, please see Katten’s Client Advisory on the topic.