Federal Reserve Expands Term Asset-Backed Securities Loan Facility
On April 9, 2020, the Federal Reserve announced the expansion of the Term Asset-Backed Securities Loan Facility (“TALF”) as part of a series of new actions providing up to $2.3 trillion in loans to support the economy. The TALF is a credit facility authorized under section 13(3) of the Federal Reserve Act intended to help meet the credit needs of consumers and small businesses by facilitating the issuance of asset-backed securities (“ABS”) and improving the market conditions for ABS more generally. The Federal Reserve broadened the range of assets that are eligible collateral for the TALF. TALF-eligible collateral will now include the triple-A rated tranches of certain types of outstanding commercial mortgage-backed securities (“CMBS”) and newly issued collateralized leveraged loan obligations (“CLOs”). However, TALF-eligible collateral does not include single-asset borrower CMBS or commercial real estate CLOs. In addition, the Federal Reserve removed residential mortgage servicing advances from the list of eligible collateral. The TALF will serve as a funding backstop to facilitate the issuance of eligible ABS (other than CMBS) on or after March 23, 2020; for CMBS, only legacy securities issued before that date will be eligible.