WASHINGTON, DC-Last week the Treasury Department and Federal Reserve Bank announced the rollout of a $200-billion Term Asset-Backed Securities Loan Facility, or TALF. Its purpose is to support the new-issue ABS sector–in other words, consumer lending. As for CRE loans, Treasury Secretary Henry Paulson had been quite clear about the direction of the bailout earlier this month when he first announced the government’s new focus on the economic crisis. Purchasing illiquid mortgage-related assets, he said then, “is not the most effective way to use TARP [Troubled Asset Relief Program] funds.”
That has not kept the commercial real estate industry from hoping–and lobbying–the government to participate in CRE debt purchases in one form or another. Along with TALF’s roll-out, the government also announced plans to buy mortgage-backed securities and debt obligations of the government-sponsored housing enterprises.
Pleased with this development, which will give multifamily finance a boost in the form of lower rates, the Real Estate Roundtable is hoping to see additional overtures to the CRE industry. Specifically, it would like the government to expand this program to include secured and unsecured commercial real estate loans.
“We are very pleased by the decision to purchase debt and MBS-issued by housing related government sponsored enterprises,” Roundtable SVP Clifton Rodgers tells GlobeSt.com. “Our view is, if those programs are structured correctly, they will helped restore confidence in the consumer loans and residential mortgage markets.” Twenty-four hours after that initiative was announced, spreads on residential mortgages have already come in significantly, he notes. “It seems to be having a positive impact.”
However the liquidity issues facing the CRE industry still have not been addressed, he continues. “There are some $400 billion in commercial mortgages that will be maturing over the next several months and if these were to go into default, it could introduce widespread systemic failure.”
The solution, as the Roundtable sees it, is obvious. “Secretary Paulson indicated in his remarks that TALF may be expanded to include other assets,” Rodgers says.
Although he declines to provide specific details, Rodgers says the Roundtable is in discussions with the federal government about expanding the program. “We have had a number of constructive meetings both with the Federal Reserve Bank and other regulatory agencies and we will continue to meet with them in the days ahead to develop an effective federal credit facility that could support commercial real estate debt.”
According to Rodgers, the government “is open to discussing the problem and potential solutions–but we don’t have any indication of timing or a structure that might be implemented.”