Back on the Highway: TALF Gets Subprime Auto Market Off the Shoulder and Up to Speed

June 07, 2010
The Federal Reserve Bank of New York launched its Term Asset Backed Securities Loan Facility (“TALF”) on March 3, 2009 at a time when the market for automobile loan asset-backed securities (“ABS”) was moribund. Working against a protracted period of high unemployment, deteriorating consumer confidence, and reduced disposable income compounded with a frozen credit market, TALF sought to reverse the constriction of certain segments of the consumer finance industry by stimulating demand for ABS through low interest lending for the purchase of qualifying ABS. Within a year of TALF’s launch, not only had the prime automobile loan ABS market rebounded, but subprime issuers had begun to return as well. This update examines the effects of TALF on collateral requirements, credit enhancements, and interest spreads in revitalizing the prime and subprime automobile loan ABS markets.