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Volume X, Number 270

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COVID-19 Update: Federal Reserve Broadens Range of Eligible Collateral for Term Asset-Backed Securities Loan Facility (TALF)

TALF Extended to Legacy CMBS and CLOs

On April 9, 2020, the Federal Reserve unveiled an array of additional programs to bolster the U.S. economy in response to the COVID-19 pandemic. One of those programs is aimed at expanding the coverage of the Federal Reserve’s previously announced Term Asset- Backed Securities Loan Facility (TALF). TALF is a facility intended to help lenders meet the credit needs of households and U.S. businesses by supporting the issuance of asset-backed securities. A summary of the facility is available here.

Today’s announcement includes the following updates to the TALF program:

  • Eligible Collateral to include Certain CMBS and CLOs. Both commercial mortgage-backed securities (CMBS) and collateralized loan obligations (CLOs) other than commercial real estate CLOs (CRE CLOs) will be included in the assets that are eligible to be pledged to the Federal Reserve under the TALF.

    • CMBS must have been issued prior to March 23, 2020 and the underlying credit exposures must be to real property located in the United States or one of its territories.

    • Only static CLOs will be eligible collateral. The eligible issuer must be a U.S. company and all or substantially all of the underlying loans must be “newly issued.” Whether the standard CLO Cayman/Delaware co-issuer structure will be an eligible issuer and the meaning of “newly issued” are open questions.

  • Eligible Borrower. The definition of Eligible Borrower was updated to “a business that is created or organized in the United States or under U.S. laws and that has significant operations in and a majority of its employees based in the United States.”

  • Exclusions from Eligible Collateral. Single‐asset, single‐borrower (SASB) CMBS and CRE CLOs will not be eligible collateral. In addition, servicing advance receivables are no longer eligible collateral.

  • Other Additional Eligible Collateral. Equipment leases and leveraged loans were also added as eligible collateral.

These updates are reflected in a new term sheet released by the Federal Reserve that is available here. The term sheet includes the “haircut” schedule that will be imposed on the different asset-classes that are permitted to be purchased under the TALF, which is consistent with the schedule used for the TALF program established in 2008. A comparison of the term sheet released on April 9, 2020 against the original term sheet released on March 23, 2020 is available here.


As the Federal Reserve and the Treasury Department finalize the programs, they continue to seek input from lenders, borrowers and other stakeholders. Comments may be sent until April 16, 2020 on the feedback form provided here.

© Copyright 2020 Cadwalader, Wickersham & Taft LLPNational Law Review, Volume X, Number 100


About this Author

Mark Chorazak, Cadwalader Law Firm, New York, Corporate and Finance Law Attorney

Mark Chorazak is a partner in the Financial Services Group. Mark represents financial institutions on a wide range of bank regulatory, transactional and compliance matters. He regularly counsels banks, thrifts, investors and other financial services firms on strategic matters and compliance issues arising under the Bank Holding Company Act, the Dodd-Frank Act and other key U.S. banking laws. Among other areas, his practice encompasses Volcker Rule compliance, fintech and financial innovation issues, authority and control matters, anti-money laundering counseling,...

Lisa Pauquette Commercial Mortgage-Backed Securities Cadwalader New York, NY

Lisa Pauquette's practice involves the representation of banks, investment banks and other financial institutions in commercial mortgage loan securitization and a variety of mortgage banking and financing transactions.

Lisa has diverse experience in securitization matters having represented major Wall Street investment banks and financial institutions in their roles as underwriters, placement agents, issuers, servicers, mortgage loan sellers, and trustees of public and private securitization transactions involving commercial and residential mortgage loans. In addition, Lisa represents clients in the purchase and sale of mortgage loans, mezzanine debt, and subordinate debt.

Lisa represented clients on transactions that have helped revive the CMBS market, including: the Developers Diversified Realty CMBS deal, which was the only CMBS deal made eligible for financing under the Federal Reserve Bank of New York's Term Asset-Backed Securities Loan Facility and the novel One Bryant Park single property securitization, involving a tranche of CMBS debt and multiple tranches of tax-exempt bonds.

Her client representations have also included the purchase and sale of residential first- and second-mortgage loans (including FHA, VA, conventional and reverse mortgage loans) and commercial and multifamily mortgage loans, as well as structuring and negotiating warehouse lines and repurchase agreements for commercial mortgage loans, mortgage assets and CMBS and RMBS securities.

Lisa graduated from Middlebury College with a B.A., and she received her J.D. from Boston University School of Law. She is admitted to practice law in the State of New York


Noah Allen is an associate in Cadwalader's Capital Markets Practice, focusing primarily on commercial mortgage-backed and CRE CLO securitization transactions. He represents investment banks and financial institutions in their roles as issuers, underwriters, placement agents and mortgage loan sellers in both public and private offerings of mortgage-backed securities and other structured finance products. He also represents investment banks, specialty finance companies and investment funds in structuring and negotiating commercial mortgage loan sales, mortgage loan participations and co-...