Today, the Federal Reserve Board (Federal Reserve) announced the expansion of the Term Asset-Backed Securities Loan Facility (TALF) to include securities backed by insurance premium finance loans and commercial mortgage-backed securities (CMBS). The creation of the TALF was announced last November. The Federal Reserve also included in its release links to the CMBS term sheet and to its frequently asked questions regarding the inclusion of CMBS in the facility. The announcement also included a link to the Federal Reserve's revised guidance on the TALF generally.
The Federal Reserve has expanded the TALF to include CMBS to “help prevent defaults on economically viable commercial properties, increase the capacity of current holders of maturing mortgages to make additional loans, and facilitate the sale of distressed properties.” As to insurance premium loans, approximately 1.5 million insurance premium loans are made to small businesses annually. Liquidity and lending to small businesses has decreased over the last several months. As a result, the Federal Reserve has expanded the TALF to include insurance premium loans to help “facilitate the flow of credit to small businesses.”
The Federal Reserve also stated in its release that beginning in June it will expand the date of maturity of TALF loans relating to "purchases of CMBS, ABS backed by student loans, and ABS backed by loans guaranteed by the Small Business Administration” from three to five years. The Federal Reserve in its statement acknowledged that “up to $100 billion of TALF loans could have five-year maturities,” but noted that “[s]ome of the interest on collateral financed with a five-year loan may be diverted toward an accelerated repayment of the loan, especially in the fourth and fifth years.”