UPDATE: Fed Chooses Collateral Monitor For Commercial Mtge Bonds
16 Juni 2009 - 6:16PM
Dow Jones News
The Federal Reserve has chosen a collateral monitor for new and
existing securities backed by commercial real estate loans as part
of a program through which it plans to offer investors cheap loans
to buy such bonds.
Trepp LLC will "assist the New York Fed by providing valuation,
modeling, analytics and reporting" on these commercial
mortgage-backed securities, the central bank said Tuesday, the
deadline for loan applications under the newly created commercial
mortgage bond portion of the bank's Term Asset-Backed Securities
Loan facility, or TALF.
The Fed is being very cautious in selecting the bonds for which
it will offer non-recourse loans to investors. Bonds must be rated
triple-A by at least two of five rating agencies, and may not be on
watch for downgrade.
The central bank may also reject the bonds based on other
factors such as "unacceptable performance of the mortgage loan
pool" or "unacceptable concentrations" of borrowers or property
types and geographic regions.
Trepp's role is to help with monitoring collateral to protect
the central bank from losses.
Trepp "will not establish policies or make decisions for the New
York Fed, including decisions whether to reject a CMBS as
collateral for a TALF loan," the bank said Tuesday.
According to the firm's Web site, Trepp is a "provider of
commercial mortgage bond securities and commercial mortgage
information, analytics and technology to the global securities and
investment management industries."
The Fed may use the services of other collateral monitors in
connection with TALF, the central bank said.
TALF was originally targeted at consumer lending, where the
program has had some success in stimulating issuance and tightening
risk premiums, which in turn should improve consumers' access to
credit and make it more affordable. New consumer-loan backed deals
have totaled $56 billion so far this year, with the bulk of them
eligible for funding through the TALF program. The sector was
frozen last year at the height of the credit crisis.
Reviving the struggling commercial mortgage bond market,
however, will take more time. So far there hasn't been any new
issuance of securities because commercial real estate lending, to
build hotels and malls, for example, has slowed significantly.
In contrast to the consumer TALF, the Fed will also offer loans
for existing CMBS, likely beginning in late July.
-By Anusha Shrivastava, Dow Jones Newswires; 201-938-2371;
anusha.shrivastava@dowjones.com