Securitized Bonds: Created on or after 1/1/09Amusingly, the Commerical Mortgage Securities Association (CMSA), better know as Chris Hoeffel (quite familiar to Zero Hedge readers) who has yet again reprised his role as the least conflicted person in the world through his positions as both Managing Director of foreign capital backed, CRE asset manager InvestCorp AND president of CMSA, had a canned, ready to print response to the Fed's actions (obviously somewhat priced into the market) which came out nanoseconds after the Fed's announcement and which we present below:
Underlying Loans: Created on or after 7/1/08
Collateral Type: AAA cusiped & cleared through DTC – required investment grade rating from minimum of 2 rating agencies
Haircut: 15% (85% leverage) for 5 year bonds to 20% (80% leverage) for 10 year bonds
Leverage Terms: Borrower may elect to index against either 3 or 5 year swaps
Spread: 100 bps
Bond Life: No more than 10 years
Prepayment: Par at any time
Early Collateral Prepayment: Flow’s through to pay down
Fed Rights: Throw out loans from prospective trusts (similar to b-piece) – NY Fed has right to engage 3rd party collateral monitors - influence structuring of hypothetical trusts (location-collateral type-etc.)
CMSA Applauds Federal Reserve on TALF AnnouncementMaybe Chris, the CMSA, and all those investors who have been buying CMBS hand over fist will soon reevaluate their optimism one they realize that the July 1, 2008 cut off date for eligible loans means that essentially the entire pool of distressed assets is completely ineligible for participation in even this brand new revision. In all honesty, ZH was hoping that the Fed would open the new TALF to all securitizations created concurrently with the advent of the wheel or discovery of fire, and a rating of Default or above would have been perfectly agreeable to Bernanke. The fact that the Fed still has not grasped the true magnitude of the problem is indicative that over the next 2 weeks we should all expect version 364.6 of the TALF once Chris scratches his head and realizes he still can't offload his garbage heap of bankrupt mall loans to taxpayers. For now, unwitting taxpayers are still safe from owning a bankrupt 30 retail outlet mall in the middle of the Yucon, purchased initially at 500% LTV and a DSCR of -10x, a -$1 billion reserve, and with pro forma stats upon conversion to high priced multi apartment units for eskimos, replete with with Arctic explorers-cum-doormen, husky shuttles and frozen igloo statues. Sphere: Related Content
Lending Facility Extended to CMBS with Five-year Term
NEW YORK—May 1, 2009—Commercial Mortgage Securities Association applauds today’s announcement by the Federal Reserve Board to extend the Term Asset-Backed Securities Lending Facility to commercial mortgage-backed securities with an increased five-year term.
TALF is a central part of the U.S. government’s plan to encourage lending by restarting the market for various types of asset-backed securities. TALF recently became operational for consumer ABS with a three-year term for these assets.
The Federal Reserve in its statement today said that, starting in June, 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 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,” the Federal Reserve said.
The Federal Reserve also indicated that up to $100 billion of TALF loans could have five-year maturities and that the FRB will continue to evaluate that limit.
“Extending TALF to CMBS with five-year terms is critical to providing liquidity and facilitating lending in the commercial mortgage market,” said Christopher Hoeffel, President, Commercial Mortgage Securities Association. “CMSA has strongly advocated for a term of five years to kickstart investor demand,” he said.
“A five-year term is more consistent with the longer-term nature of commercial lending and will provide more flexibility to borrowers as they navigate the current real estate cycle,” he said. “CMSA and its members applaud the government and policymakers for extending TALF to CMBS and extending the term to five years,” Mr. Hoeffel said.
Since late 2008, CMSA has been in regular discussions with policymakers and has outlined the benefits for extending TALF’s financing term to five years. Those discussions followed CMSA’s formal recommendation to the government that the Federal Reserve extend the loan term and that it make legacy commercial assets eligible for TALF.
While today’s announcement by the Federal Reserve extends TALF to newly issued CMBS with a five-year term, CMSA anticipates that policymakers will extend TALF to legacy assets in the weeks ahead, as previously stated.
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