WASHINGTON — The Federal Reserve announced Friday that it will launch a much-awaited program in June to bolster commercial real estate lending.
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 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.
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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 TALF to include help for commercial real estate lending.
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.
The longer five-year loans will be available in June to investors that want to buy securities backed by student loans and loans guaranteed by the Small Business Administration, the Fed said. A total of $100 billion could have these five-year maturities, the Fed said.
Currently, those and all other loans under the TALF are for three years.
Also starting in June, the Fed will offer loans to investors wanting to buy securities backed by "insurance premium finance loans." Those are loans extended to small businesses so they can obtain property and casualty insurance.