WASHINGTON – The Structured Finance Association (SFA) today applauded the Federal Reserve for taking initial steps to support the economy by purchasing Treasury securities and agency mortgage-backed securities (MBS) “in the amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy,” as well as establishing the Term Asset-Backed Securities Loan Facility (TALF) “to support the flow of credit to consumers and businesses.” SFA also applauded the additional actions taken to support the economy through direct purchase of MBS and commercial mortgage-backed securities (CMBS). Given the enormous magnitude of market disruption occurring, SFA also called on the Fed to add other allowable collateral such as certain private label residential mortgage, unsecured personal loans, and commercial mortgage assets as soon as possible to further support American consumers and businesses.

“The Structured Finance Association and its 370 corporate member institutions support today’s action by the Federal Reserve to help address the unique nature of the economic impacts of the COVID-19 pandemic, and we hope this is simply a first step on their part,” said Michael Bright, chief executive officer of SFA. “Yesterday, our membership spoke loud and clear in asking the Fed to provide the financial markets needed calm by enacting a new version of TALF. We are certainly pleased with these initial steps, but we also call on the Fed to expand eligible collateral permissible for TALF – specifically to include residential and commercial mortgages – and increase its size as market conditions warrant so that all credit markets can unfreeze and prevent further economic degradation.” 

The Federal Reserve announcement follows calls on Sunday by SFA for prompt implementation of a program substantially based on the Term Asset-Backed Securities Loan Facility (TALF), which was announced by the Federal Reserve Bank of New York in November 2008 and was intended to make credit available to consumers and small businesses on more favorable terms with a government guarantee.

Yesterday, SFA outlined changes it believes ought to be made to TALF to bring it current, including:

• permitting all eligible asset classes approved by the Fed in 2008/2009, not just the first phase;

• permitting legacy asset-backed securities (ABS) of all eligible asset classes to be pledged as collateral;
• updating the list of eligible asset classes to include those that did not exist in 2008 or were ineligible at that time for reasons that are no longer relevant;
• expanding credit ratings criteria;
• eliminating certain time consuming requirements to expedite operational start; and,
• more flexible terms to provide more benefit to the economy.

Full text of the letter sent Sunday is available online here.

With more than 370 member institutions comprised of accounting firms, broker/dealers, diversified financial intermediaries, investors, issuers, IT vendors, law firms, mortgage insurers, other small financial institutions, rating agencies, servicers and trustees, SFA is the leading voice for the securitization industry. For more information, please visit structuredfinance.org.

NOTE: CEO Michael Bright is available for interviews. Please direct all inquiries to Micah Johnson at [email protected].