Fed launching commercial real-estate lending program

Fed launching commercial real-estate lending program

The Associated Press
Updated: 05/01/2009 04:36:20 PM MDT

Washington » The Federal Reserve announced Friday that it will launch a much-awaited program in June to bolster commercial real-estate lending.

And to help make the program more attractive to investors, the Fed will provide longer, five-year loans.

Investors would use the money to buy securities backed by commercial real-estate loans.

The goal is to boost the availability of these loans, help prevent defaults on commercial properties like office parks and malls, and facilitate the sale of distressed properties, the Fed said.

The new commercial real-estate component is part of a broader program rolled out in March that aims to jump-start lending to consumers and small businesses called the Term Asset-Backed Securities Loan Facility, or TALF.

It figures prominently in efforts by the Fed and the Obama administration to ease credit stresses and stabilize the financial system. Those are critical elements needed to lift the country out of recession.

The TALF has the potential to generate up to $1 trillion in lending for households and businesses.

Earlier this year, the government said it planned to expand the TALF to include help for commercial real-estate lending.

"There's a looming crisis in commercial real estate whereby owners of shopping malls, hotels, rental properties and many other types of buildings are unable to refinance or to pay for new construction," Fed Chairman Ben Bernanke warned lawmakers on Capitol Hill in March.

The market for so-called commercial mortgage-backed securities, or CMBS, came to a "standstill in mid-2008," the Fed said Friday in announcing the launch of the new piece of the TALF program. The CMBS market accounted for almost half of new commercial mortgage originations in 2007, the Fed said.