Expanded TALF Will Encourage Commercial Real Estate Investment

by National Association of Realtors

Profits upWASHINGTON, February 12, 2009. The U.S. Treasury announcement that commercial mortgage-backed securities will now be accepted as eligible collateral for the Term Asset-Backed Loan Facility (TALF) will encourage investment in the commercial real estate market, according to the National Association of Realtors®.

Over the past year, the broader credit crisis that has permeated the world capital markets has increasingly curtailed commercial lending activity. Banks have tightened their credit standards and reduced loan volume while the commercial mortgage-backed securities market has stopped functioning effectively. Without liquidity, commercial borrowers face a growing challenge of refinancing maturing debt and the threat of rising delinquencies and foreclosures.

A severe lack of credit threatens commercial real estate and poses significant risks for the whole economy, said NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth. Expanding the TALF and opening it up to commercial mortgage-backed securities is a movement in the right direction, and welcome news for the American economy.

The announcement implements policy directions recommended and endorsed by NAR Realtors® Commercial Alliance through its Commercial Economic Stimulus Work Group. The work group developed a plan to address high-priority issues like lack of credit to avoid further losses in the commercial real estate markets as a part of the national economic recovery plan.

Though much still remains to be done, this policy decision will help reassure investors in the vital commercial real estate sector, which provides more than 9 million jobs and generates roughly 70 cents out of every dollar in local government budgets, said RCA Chair Robert Toothaker. There is no secondary market for commercial mortgages, so it is important to encourage lenders and investors whose activity will be essential in refinancing the performing commercial real estate loans in the marketplace, many of which are due to reset soon.

Under the new approach, TALF credit facilities will be extended to newly originated AAA-rated securities backed by commercial real estate loans. This important measure will enhance liquidity and ease the lending crisis facing commercial markets, said Toothaker.

Expanding the TALF program to include commercial mortgage-backed securities has been a key part of NAR message to policymakers and is integral to the commercial economic stimulus plan developed by the association commercial leaders.

NAR is encouraged by this positive announcement and will continue to work with Congress and the regulatory agencies as further policy options are considered to address the crisis in the credit market and ensure overall economic recovery so that real estate will once again lead the economy to recovery, Toothaker said.

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