The Federal Reserve announced today it would be including as eligible collateral securities backed by four new asset classes in its Term Asset-Backed Securities Loan Facility (TALF). The new classes consist of mortgage servicing advances (funds advanced to investors by servicers on behalf of borrowers), loans or leases relating to business equipment, leases of vehicle fleets and floorplan loans (auto floorplan loans were already included as an acceptable asset class for TALF). Although the Federal Reserve has previously discussed including the latter three asset classes, the addition of mortgage servicing advances as an approved asset class was new. The Federal Reserve explained its intention to "improve the servicers' ability to work with homeowners to prevent avoidable foreclosures." Including mortgage servicing rights as an asset class under TALF would help establish a more stable source of liquidity and credit assurance for servicing advances, hopefully encouraging servicers to make them.
The new categories of collateral will be eligible for the April TALF funding. The Federal Reserve also announced that subscriptions for the April funding will be accepted on April 7, and those loans will settle on April 14. Additional details on the April funding are expected to be released on March 24
The subscription period for the first TALF funding ends today, and those loans will be settled on March 25. The Federal Reserve Bank of New York reported that $4.7 billion of loans were requested to be funded in the first subscription period. Although the amount of loans subscribed was somewhat less than had been expected, New York Fed President William C. Dudley described the initial subscriptions as "a good start for a program that we will continue to build on in the future. It is encouraging that the spreads in the areas where the program is now focused have narrowed significantly. Our goal is to get the securitization market working again."