The Mortgage Bankers Association (MBA) is commending the announcement by the Federal Reserve that they are broadening the scale and scope of its mortgage-backed securities (MBS) purchases to include outstanding non-agency commercial MBS.
The Feds have injected a massive $2.3 trillion in loans to help support the economy. The announcement on Friday said the funding will assist households and employers of all sizes and bolster the ability of state and local governments to deliver critical services during the coronavirus pandemic.
As part of the announcement, the Feds are now accepting triple-A commercial mortgage-backed securities as well as newly issued collateralized loan obligations as part of it’s Term Asset-Backed Securities Loan Facility (TALF) program. The size of the facility will remain $100 billion, and TALF will continue to support the issuance of asset-backed securities that fund a wide range of lending, including student loans, auto loans, and credit card loans, according to the official release.
“This decision protects borrowers by stabilizing commercial mortgage markets more broadly and helps ensure lenders can continue to finance properties – particularly in small and mid-sized markets across the country, where numerous small businesses employ millions of Americans,” MBA president and CEO Robert Broeksmit. “MBA looks forward to continuing to work with all policymakers and stakeholders, including Congress and the administration, to help borrowers, lenders, and mortgage servicers during the pandemic.”
To ensure credit flows to small and medium-sized businesses, the Feds also plan to purchase up to $600 billion in loans of $1 million to $25 million through the Main Street Lending Program. Businesses who were in good standing pre-pandemic could apply for 4-year loans through the program and principal and interest (P&I) payments will be deferred for one year. The Treasury will also provide $75 billion in equity using funding from the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
"Our country's highest priority must be to address this public health crisis, providing care for the ill and limiting the further spread of the virus," said Federal Reserve chairman Jerome Powell, in a statement. "The Fed's role is to provide as much relief and stability as we can during this period of constrained economic activity, and our actions today will help ensure that the eventual recovery is as vigorous as possible."
The Feds are also establishing a new Municipal Liquidity Facility to help state and local governments better manage cash flow pressures in order to continue to serve households and businesses in their communities. It will offer up to $500 billion in lending to states and municipalities, plus $35 billion from the Treasury to protect it from any potential losses.