The Commercial Mortgage Securities Association (CMSA) asked Congress leadership to extend the Term Asset-Backed Securities Lending Facility (TALF) to commercial real estate as a way to facilitate lending in the private commercial mortgage market.
As policymakers develop Troubled Asset Relief Program (TARP) priorities for the upcoming Administration, CMSA, together with a group of eleven industry groups, have asked Congress for $20 billion in TARP funds, which makes up 2.9% of the overall $700 billion in allocated TARP relief.
The 11 commercial real estate industry groups believe such a move would ease the lending crisis that has exacerbated the downturn in the U.S economy, which has begun to negatively affect commercial real estate market conditions.
The coalition of groups suggested that the Federal Reserve Bank of New York utilize TARP funds to create a commercial lending facility that would provide the private market with liquidity and allow for the extension of new credit, as well as assist in refinancing performing loans held by banks or in CMBS pools, indicating that it would facilitate the sale of CMBS biatraditional private sector sources, creating a flurry of market activity.
We expect this credit facility to generate very meaningful results and to jumpstart the broader private commercial mortgage markets, the industry letter said.
The letter addressed to House Financial Services Committee Chairman Barney Frank and Ranking Chairman Spencer Bachus stated that the broader credit crisis has seeped through the worlds capital markets and has severely cut commercial lending activity. It added that this problem has the potential to negatively impact the $6 trillion of commercial real estate market, which is financed in part through more than $3 trillion of debt.
Currently, banks and the CMBS market represent 75% of all outstanding commercial real estate loans, the joint letter stated. The CMBS market has ceased to function with respect to new issuance, and existing bonds trade at highly excessive spreads, all of which heralds systemic dysfunction.
CMSA along with the coalition of industry groups also submitted a similar letter to to Senate Finance Committee Chairman Christopher Dodd. The letter to the Senate addressed the same concerns and requests