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Home > Markets > Term Asset-Backed Securities Loan Facility

Term Asset-Backed Securities Loan Facility
(Legacy CMBS): Frequently Asked


Effective May 19, 2009

TALF Documents and


Which nationally recognized statistical rating organizations
(NRSROs) are TALF CMBS-eligible rating agencies?
TALF CMBS-eligible rating agencies are DBRS, Inc., Fitch Ratings,
Moody’s Investors Service, Realpoint LLC and Standard & Poor’s.
When is the initial subscription date for legacy CMBS?
The initial legacy CMBS subscription date will be in late July. The
specific date will be announced shortly. The subscription and
settlement cycle for both legacy and new issue CMBS will occur in the
latter part of each month, whereas the cycle for non-CMBS ABS TALF
asset classes will remain in the first half of the month.
On what basis will the New York Fed decide whether or not to
accept a CMBS under the legacy TALF program?
The New York Fed may reject a CMBS based on factors including, but
not limited to, the following:
The CMBS does not meet the explicit requirements stated in
the Terms and Conditions.
Unacceptable performance of the mortgage loan pool. CMBS
that represent interests in pools with high cumulative losses, a
high percentage of delinquent loans, loans in special servicing
or loans on servicer watch lists or a high percentage of
subordinate-priority loans may be rejected. The New York Fed
may consider in its decisions forecasts of pool level losses
under various stress scenarios.
Unacceptable concentrations. CMBS that represent interests
in pools that, alone or considered together with loan pools
backing other TALF-financed CMBS, possess one or more
concentrations (such as borrower sponsorship, property type
and geographic region) considered unacceptable to the New
York Fed may be rejected.
The New York Fed will utilize the services of one or more agents in
connection with the review of legacy CMBS and the loan pools that
back them.
What are the adjustments that will be required to determine
the weighted average life of a legacy CMBS?
The New York Fed is considering requiring that default-related
circumstances be considered in calculating the weighted average life
of a legacy CMBS. Details of any required adjustments will be
announced shortly.

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How will the par-based haircuts be applied to the current
prices of the CMBS?
The maximum size of a TALF loan secured by a CMBS would be the
current market price of the CMBS minus the base dollar haircut. This
is the equivalent of a collateral haircut equal to the base dollar haircut
divided by the current market price. For example, assuming a CMBS
with a par value of 100 and a seven-year weighted average life, with
a base dollar haircut of 17 percent of par:
If the market price is 75% of par, the loan amount is 58 (7517) and the collateral haircut is 23% (17/75).
If the market price is 50% of par, the loan amount is 33 (5017) and the collateral haircut is 34% (17/50).
Under this formulation, the size of the haircut increases with the size
of the price’s discount from par, reflecting a recognition that large
discounts from par generally indicate credit concerns.
Do CMBS (e.g., Class A-2) that receive principal later than the
other most senior CMBS classes (e.g., Class A-1) but are
otherwise pari passu with such other senior CMBS, qualify for
TALF financing?
Yes, the exclusion of “junior” CMBS in the Terms and Conditions is a
reference to subordination for credit support, not to a later position in
the time tranche sequence.
When will more information about the other requirements that
will apply to legacy CMBS be available?
The New York Fed recognizes the importance of providing more
specific information about the procedures and requirements for
legacy CMBS, including the process for the New York Fed's right to
reject CMBS as TALF loan collateral and the requirement that TALF
loans be used to fund recent secondary market transactions that are
executed on an arm's length basis. The New York Fed intends to
announce the information well in advance of the initial subscription
date for legacy CMBS.

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