Friday, May 1, 2009

The Fed adds CMBS to TALF

This was expected. From what I hear, the CMBS market has been going haywire lately - investors trying to get ahead of the Fed's announcement:
The Federal Reserve Board on Friday announced that, starting in June, commercial mortgage-backed securities (CMBS) and securities backed by insurance premium finance loans will be eligible collateral under the Term Asset-Backed Securities Loan Facility (TALF).

The CMBS market came to a standstill in mid-2008. The inclusion of CMBS as eligible collateral for TALF loans will 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. CMBS accounted for almost half of new commercial mortgage originations in 2007.


The Board also authorized TALF loans with maturities of five years. Currently, all TALF loans have maturities of three years. TALF loans with five-year maturities will be available for the June funding to finance purchases of CMBS, ABS backed by student loans, and ABS backed by loans guaranteed by the Small Business Administration.
The Fed was "talked" into extending the term-length of eligible TALF loans in order accommodate the CMBS market. The duration of commercial real estate loans are typical longer other types of loans.

By extending the term of TALF loans, the Fed's exit strategy just got a little more hazy. If inflation pressures start to turn around, which is not expected for at least a year or two out, the Fed will not be able to unwind the longer-term TALF funds. The Fed has announced up to $1 trillion in TALF funding, but the current limit sits at $200 billion; and of that, $100 billion is currently available for the 5-year loans.

The Fed will watch this program closely, having indicated that the size and scope of the program could be increased.

Rebecca Wilder

1 comment:

  1. Anonymous Banker asks: Trepp LLC, TALF and JP Morgan Chase Connection... is there a conflict of interest?
    With apologies, I had difficulty getting the links to connect into this comment. Please go to original article for links to supporting documents.

    I hate the TALF program. It is going to come back to bite each and every one of us .... the taxpayers. First it was designed to get our securitization market flowing again, presumably to unfreeze the credit markets. It is to be a mechanism for the Treasury Department to guarantee, with our tax dollars, toxic loans stripped from the Banks' balance sheets. It is duplicitous and it was designed to be that way. Now, in addition to subprime credit cards, subprime auto loans (FRBNY's words, not mine), student loans, and small business loans, they've tagged on Commerical Mortgages.

    So I went to the FRBNY's website to read up on the terms and conditions and found that the FRBNY has hired a collateral monitor, a company by the name of Trepp LLC. And I was simply curious to find out if I could find out who really owned Trepp and if it's involvement is as "arms length" as one would expect it to be.
    Here is an interesting interview by CNBC with Tom Fink, senior vice president of Trepp. I noticed that CNBC never once asked him if there could be any perceived conflict of interest with Trepp accepting this position as "The Feds new Toxic Avenger".

    So, I pose this question to the blogging universe and to our leaders on the Hill and to President Obama:
    How many Commercial Mortgages will Chase Bank be allowed to unload through TALF, a government program that has hired as its collateral monitor Trepp LLC whose UK Parent company utilizes, as their stockbroker, a company that is owned 50% by JP Morgan Chase.
    Does anyone else see this as a conflict of interest?
    Here's the back up data to this question. Read it and decide for yourself. If you think I'm wrong, I'd love to hear you tell me why you think I'm wrong.

    About Trepp, LLC
    Trepp LLC, headquartered in New York City, is an established independent provider of CMBS and commercial real estate information, analytics and technology in the securities and investment management industry. Trepp serves the needs of both the primary and secondary markets by providing one of the largest commercially available trading quality CMBS deal libraries, as well as a suite of products for the CRE derivatives and whole loan markets. Trepp's clients include broker dealers, commercial banks, asset managers, and investors.

    About PPR
    PPR, headquartered in Boston, is an established provider of independent global real estate research and portfolio strategy services to the institutional real estate community. PPR provides views on markets in North America, Europe and Asia and offers expertise in real estate markets, real estate portfolio analysis, mortgage risk, and the design of real estate investment strategies. Clients include commercial banks, insurance companies, Wall Street firms, rating agencies, government agencies, pension funds, investment advisors, real estate investment trusts, and private investors.
    Trepp and PPR are each wholly owned by DMG Information, Inc., the business information division of Daily Mail and General Trust, plc (DMGT).
    And here's information on the parent company: Daily Mail and General Trust , plc (DMGT)
    and their "stockbrokers"

    JPMorgan Cazenove Ltd
    20 Moorgate
    EC2 6DA
    Great Britain
    Cazenove Group is a private company, registered in Jersey, which holds the 50% interest in J.P. Morgan Cazenove, the joint venture with J.P. Morgan. J.P. Morgan Cazenove is one of the UK's leading investment banks. Jointly owned by J.P. Morgan and Cazenove, it combines innovative and impartial advice with a broad range of capabilities and proven execution skills.


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