Mortgage group seeking further expansion of TALF

NEW YORK Tue Feb 24, 2009 7:13pm EST

NEW YORK Feb 24 (Reuters) - The Mortgage Bankers Association is lobbying the U.S. government to expand the reach of a $1 trillion lending program to existing commercial mortgage-backed securities, an MBA executive said on Tuesday.

The MBA is making headway in its initiative to get the Federal Reserve to provide funding for investors who would purchase the outstanding commercial mortgage bonds that are clogging bank balance sheets, in addition to new ones, Jan Sternin, a senior vice president of the MBA's commercial mortgage group, told Reuters.

"There's been indication that we are down the road" toward making existing commercial assets eligible, Sternin said.

U.S. Treasury Secretary Timothy Geithner earlier this month announced an expansion of the Term Asset-Backed Securities Loan Facility (TALF) from consumer loans to mortgages on commercial properties, and in size from $200 billion. The program, to be launched soon, is aimed at unfreezing consumer credit markets by focusing funding on the purchase of new loans.

The problem is that the credit crunch has halted issuance of CMBS, whose yields around 15 percent have put a stop to new lending, analysts said. Programs that would provide bids for outstanding assets, such as TALF, could help create a floor that would attract other buyers, they said.

Jump-starting CMBS would also be challenged by the current environment for office, retail and apartment buildings, where delinquencies are rising and property values are falling. (Editing by Marguerita Choy)

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