The Federal Reserve Board formed two new interest rates effective for loans extended under the Term Asset-Backed Securities Loan Facility (TALF), the Fed announced Tuesday. The rates apply to certain loans, vintage 2009, secured by asset-backed securities (ABS) with average lives-to-maturity of less than two years. The Fed bases the new rates on one- and two-year London interbank offered (LIBOR) swap rates, which should better match the duration of underlying ABS collateral. The new rates are slated to take effect for the May TALF funding and apply to fixed-rate TALF loans secured by non-government-guaranteed ABS. The interest rate for TALF loans secured by ABS with average lives-to-maturity of less than one year will be the one-year LIBOR swap rate +100bps, the Fed said. The interest rate for loans secured by ABS with average lives-to-maturity between one year and two years will be the two-year LIBOR swap rate +100bps. The current three-year LIBOR swap rate +100bps continues to apply to loans secured by ABS with average lives-to-maturity of two years or more. TALF recently expanded to include new ABS categories, such as auto loans and credit cards, but regulators made no other major changes to the federal program since its inception. The Fed and Treasury Department jointly launched TALF in early March, and the program has faced criticism since. One credit-rating agency went so far as to say regulators must re-vamp TALF for it to attract junior investors and encourage new issuance. TALF, as it stands, is unlikely to meaningfully impact the currently tight credit markets, Moody’s Investor’s Service found in its recent report. The program will not “gain significant momentum” until the terms are widened to apply to other securities, and therefore the wider investor playground, including pre-2009 triple-A rated commercial mortgage-backed securities (CMBS) and residential mortgage-backed securities (RMBS). Currently TALF only covers triple-A consumer assets originated for securitization in 2009. Write to Diana Golobay at [email protected].
Two New Interest Rates Introduced for TALF
Most Popular Articles
Latest Articles
Mortgage groups gear up to get trigger leads bill passed in 2025
The trigger leads bill has become a 2025 priority for the mortgage industry after failing to pass the House of Representatives last week, despite Senate approval.
-
CFPB sues Rocket, The Jason Mitchell Group over RESPA violations
-
The homebuilders’ 2025 supply and demand problem
-
Mortgage groups push FHA for loss mitigation extension
-
What it’s like connecting reverse mortgage professionals with forward lending partners
-
Rocket’s counterpunch: Calling Out HUD and the DOJ