This morning, the Federal Reserve and Treasury jointly issued releases announcing the extension of the Term Asset-Backed Securities Loan Facility (TALF). The TALF, which was originally scheduled to terminate December 31, 2009, will now be extended through March 31, 2010, for TALF loans against newly issued asset-backed securities (ABS) backed by consumer and business loans and legacy commercial mortgage-backed securities (CMBS), and through June 30, 2010, for TALF loans against newly issued CMBS.

The Federal Reserve and Treasury are extending the TALF “[t]o promote the flow of credit to businesses and households and to facilitate the financing of commercial properties.” Although undoubtedly, conditions in financial markets have improved considerably over the last several months, both the Federal Reserve and Treasury acknowledge that the markets for ABS and CMBS “are still impaired and seem likely to remain so for some time.” The Federal Reserve noted in its release that it “will continue to monitor financial conditions and will consider in the future whether unusual and exigent circumstances warrant a further extension of the TALF to help promote financial stability and economic growth.”

Although TALF's term has been extended, the Federal Reserve's release emphasizes that the facility will most likely not be extended to encompass any new classes of eligible collateral, noting that “[t]he securities already eligible for collateralizing TALF loans include the major types of newly issued, triple-A-rated ABS backed by loans to consumers and businesses, and newly issued and legacy triple-A-rated CMBS.” The Federal Reserve and Treasury, however, “are prepared to reconsider their decision if financial or economic developments indicate that providing TALF financing for investors' acquisitions of additional types of securities is warranted.”