Real estate lifeline extended through mid-2010

Emergency lending program extended through June 30 for new commercial mortgage-backed securities, March 31 for those previously issued.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)

Bailout tracker
Follow the money: Bailout tracker
The government is engaged in a far-reaching - and expensive - effort to rescue the economy. Here's how you can keep tabs on the bailouts. More
When do you believe you will drive an electric vehicle such as the GM Volt?
  • As soon as they're available
  • In the next 5 years
  • Sometime in the future
  • Never

WASHINGTON (Reuters) -- The U.S. Federal Reserve said Monday it will extend to mid-2010 an emergency program aimed at boosting lending in the ailing commercial real estate market.

In a joint announcement with the U.S. Treasury Department, the Fed said it would extend its Term Asset-Backed Securities Loan Facility (TALF) to June 30 for newly issued commercial mortgage-backed securities, a program that has yet to get off the ground.

The Fed and the Treasury also extended through March 31 its TALF for newly issued securities backed by auto, credit card, student and small business loans, and existing CMBS.

Analysts said the move is most important to the commercial real estate sector being buffeted by a lack of credit and as the recession curbs revenue from office, retail and apartment buildings. The industry has been often cited by Fed officials in the past month as a particular danger to a U.S. economic recovery if borrowers with maturing loans find no other outlet than default.

"It seems to me that the Fed realizes that this program has had a positive impact on the markets and also that the markets are not yet healthy enough to walk on their own at this point," said Scott Buchta, a strategist who follows ABS and CMBS at Guggenheim Capital Markets in Chicago.

While financial conditions have improved recently, markets for ABS backed by consumer and business loans and for CMBS are still under strain and seem likely to remain so for some time, the Fed said. TALF is largely seen as a success for lowering some consumer borrowing costs and driving some of the biggest rallies in securities markets where the money is raised.

ABS yields are now so low that that investors have begun to purchase bonds independent of the federal program. Under TALF, investors apply for non-recourse loans whose proceeds are earmarked for designated securities.

The issuance window for new issue CMBS was extended to June since those deals take more time to arrange, the Fed said. Five or six issues from real estate investment trusts are expected, said Brian Lancaster, head of mortgage and other asset-backed strategy at RBS Securities in Stamford, Connecticut.

"It's encouraging (for CMBS) but we are not quite there," Lancaster said.

Lenders are reluctant to refinance billions of dollars in loans made under easy terms and aggressive expectations that rents and property values would rise. But revenues are falling and prices nationally are now off 35% since October 2007, forcing borrowers to either put more equity in their properties or plead for extensions of current loan terms.

General Growth Properties Inc. (THE U.S. FEDERAL), the second largest U.S, mall-owner, in April blamed its bankruptcy on investors of its loans in CMBS.

The Fed said authorities had considered expanding TALF to other types of collateral, but decided against it for now. Investors had hoped the TALF would cover existing residential mortgage securities, but that speculation dimmed in recent weeks with those bonds seen drawing support from the Treasury's public-private investment plan.

The Fed said officials could reconsider that decision if economic or financial conditions warrant.

"It is rather like triage," said Jay Mueller, senior portfolio manager with Wells Capital Management in Milwaukee, Wisconsin. "Several of the markets that were in trouble are functioning much better. The Fed is putting resources where they are most needed." To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
50 years of the Ford Mustang Take a drive down memory lane with our favorite photos of the car through the years. More
Cool cars from the New York Auto Show These are some of the most interesting new models and concept vehicles from the Big Apple's car show. More
8 CEOs who took a pay cut in 2013 Median CEO pay inched up 9% in 2013 to $13.9 million. But not everyone got a bump last year. Here are eight CEOs who missed out. More
Sponsors
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Copyright 2009 Reuters All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.