A week before the Federal Reserve of New York launches its program to boost the asset-backed securities market, the central bank emphasized it will extend loans to all eligible borrowers.

It also revised compliance terms for participating investors and refined definitions on the securities eligible for the Term Asset-Backed Securities Loan Facility, commonly known as TALF.

In its revision Wednesday, the central bank stopped short of guaranteeing funding, but said if an eligible borrower provides qualified collateral "there should be every expectation of financing."

The bank said it reserves the right not to fund "in exceptional cases," if it receives "adverse information" about the borrower, but those cases are expected to be "isolated and rare."

The Fed hopes to encourage greater participation by making these clarifications. The Fed's "unfettered right" to decline a loan application on closing day was a concern for some investors, said Reed Auerbach, a partner at McKee Nelson LLC, a New York-based securitization law firm.

TALF is one of several programs initiated by the Fed to help stabilize financial markets and stimulate lending. Through TALF, the Fed will extend loans that will be secured by newly created bonds backed by auto, credit card, student and small business loans. The bonds must have the highest triple-A rating.

The revisions issued also include compliance requirements on inspection and recourse if collateral is found ineligible.

Issuers and sponsors have to ensure the information included in their documents includes a signed certificate indicating the collateral is TALF-eligible and that the Fed is indemnified from any losses if these certifications are untrue.

Some investors may find that providing such details and the possibility that the Fed or other agencies may inspect their books onerous.

Allowing the Fed to inspect investor's documents could be a "deterrent," said Mark Fontanilla, managing director at Capitalfusion Partners, a small structured credit advisory firm looking to participate in the TALF program. "It could be more of a hassle than it is worth."

That said, Capitalfusion still plans to tap the program.

Steve Persky of Dalton Investments, a hedge fund based in Los Angeles, says it is "reasonable" for the Fed to go examine these documents because it is lending money to these firms.

"If you want the money, you should have to open your books," Persky said. "As a taxpayer, I would be shocked if the Fed and the Treasury gave away money without checking."

Persky said his firm is likely to tap TALF when it expands to include residential and mortgage-backed securities. The Fed hasn't indicated when this will happen though the program is slated to expand to $1 trillion and include these more troubled assets.

The New York Fed also fine-tuned its definitions of prime and subprime as it relates to auto asset-backed securities and refined eligibility criteria for bonds backed by dealer inventories.

Auto loan and lease-backed bonds will be considered prime if the weighted average FICO score of the receivables is 680 or greater. The FICO score is a number assigned to depict the credit quality of the borrower.

Receivables without a FICO score are assigned the minimum FICO score of 300 for this calculation, the Fed said on its Web site.

Credit card asset-backed securities are considered prime if at least 70% or more of the receivables have a FICO score greater than 660. FICO scores must reflect performance data within the last 120 days.

To help remove any ambiguities about auto inventory-backed securities, the central bank said Wednesday that eligible bonds must be issued "to refinance existing auto dealer floorplan asset-backed securities" maturing in 2009 and may also include bonds in which all or most of the lines of credit underlying the bonds were originated on or after Jan. 1, 2009.

The TALF program is set to launch on March 17 as the bank begins to accept applications for loans. The bank will begin disbursing funds on March 25.

More information on the revisions can be found on the New York Fed's Web site, http://www.newyorkfed.org/.

-By Anusha Shrivastava, Dow Jones Newswires; 201-938-2371; anusha.shrivastava@dowjones.com