Federal Reserve supports National Automobile Dealers Association’s (NADA) initiative and establishes TALF credit facility of $200 billion.
Last Friday US President Bush announced to provide $17.4 billion in bridge loans to General Motors and Chrysler, following this event Federal Reserve takes the necessary steps to increase inventory financing. $200 billion TALF (Term Asset-Backed Securities Loan Facility) program was designed to facilitate the issuance and sale of securitized auto loans. However, at the time the TALF was announced, it was unclear whether it would include loans for dealers at the wholesale level. That uncertainty has now been resolved.
The Federal Reserve on Friday clarified the eligibility requirements under the new Term Asset-Backed Securities Loan Facility (TALF) and, in doing so, for the first time included loans for dealer inventory financing as a qualifying asset class.
In addition to confirming the eligibility of floorplans loans, the Federal Reserve also extended the term of TALF loans from one to three years and provided that TALF loans could have fixed or floating interest rates. These changes will make it easier for auto finance companies to use the TALF to issue floorplan securitizations.
“NADA’s goal all along was to restore liquidity in the credit markets for all dealers and their customers,” says Andy Koblenz, vice president of legal and regulatory affairs, NADA. “By working with the Federal Reserve and the Department of Treasury to ensure that floorplanning loans were included, NADA was able to give creditors confidence to once again make loans available to dealers to finance the inventory on their lots. This will, in turn, help ensure that dealers have at their dealerships the selection of vehicles that consumers want to buy.”
L.D.