Congress Pushes Feds to Extend TALF

The program, which has been tweaked several times since its launch--including an inclusion of CMBS assets earlier this year, is only now beginning to gain traction, its advocates say. Ending it this year will short-circuit any progress made--as well as exacerbate the growing problems in the commercial real estate sector.

The chief vehicle for this lobbying request is a letter to Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke penned by Rep. Paul Kanjorski (D-PA), chairman of the Financial Services Subcommittee on Capital Markets, and Rep. Gary Miller (R-CA) requesting the extension. It is expected to be signed by at least 50 House members before Congress adjourns for August, according to the Real Estate Roundtable.

"Given sufficient time, we believe [TALF] will be instrumental in helping to restart the CMBS market and in enhancing liquidity in the commercial real estate market. Due to the lead time necessary to assemble TALF-eligible CMBS transactions, however, the program's remaining term does not permit adequate time to develop sufficient volume to address the massive credit shortfall in the sector," reads a draft version of the letter.

CMSA president Patrick Sargent echoes these sentiments in a prepared statement. CMSA was unable to return a call to GlobeSt.com in time for publication. "We are just beginning to see applications for TALF-backed loans from investors who are critical to private lending, so there is a crucial window of opportunity to revitalize the commercial mortgage sector" he said. Indeed, at four months the lead time for CMBS deals is longer than other consumer type facilities available under TALF--for all intents, borrowers under the program would have to have applications in by early Fall if the sunset date remains.

Certainly the consensus in the real estate community is that the current lending environment and credit markets is untenable for a return to health. "Until there is new lending available, then there will be a problem in the commercial markets as the hundreds of billions of dollars tied up in maturing CMBS come due with no meaningful refinancing options," Adam Weissburg, partner with Cox Castle & Nicholson, tells GlobeSt.com. "Indeed, even if there was new money, those refinancing would be challenging given drops in value and cash flow."

Earlier this month, the Joint Economic Committee convened on TALF, hearing testimony about the necessity of expanding its term. Real Estate Roundtable Jeff DeBoer said ending the program on its original schedule will result in it not having "the desired effect on price discovery and a return of an active securitization market."

Furthermore more tinkering with the program may be advisable, according to Richard Parkus, a research analyst for Deutsche Bank Securities, who also testified. He suggested the addition of floating-rate as well as fixed-rate loans to entice borrowers who think the costs of borrowing under the program are too high.