Bank Of America To Sell TALF Auto Loans

Bank of America Corp. (BAC) plans to sell bonds worth $2 billion backed by auto loans that are eligible for the Federal Reserve’s Term Asset Backed Securities Loan Facility (TALF) program to boost lending and maintain credit flow to the broader economy.

Investors can procure cheap loans for buying newly created consumer loan-backed, new and existing commercial mortgage-backed bonds. The deadline for investors to request loans for buying asset- backed debt for the seventh round of the TALF is Sept. 3.

The deal, called BAAT 2009-2, will be jointly led by Bank of America/Merrill Lynch, Barclays Capital (BARC), Citigroup Inc. (C), Credit Suisse Group (CS) and Royal Bank of Scotland (RBS). Last month, Bank of America sold the first deal eligible under TALF of $4 billion auto-loan backed deal at 135 basis points over a benchmark.

TALF was set up in March to reinvigorate the battered securitization market following the bankruptcy of Lehman Brothers Holdings Inc. Although TALF was originally applicable only to securities backed by consumer loans, it has been expanded to include commercial mortgage loan-backed bonds.

TALF loans against newly issued asset-backed securities and existing commercial mortgage-backed securities will be extended through March 31, 2010. For newly issued CMBS, which takes considerable time to be put together, the extension is until June 30, 2010.

The Fed is relying on the TALF to lower borrowing costs and unlock credit to consumers and small business. The program may provide as much as $200 billion in loans to finance the purchase of highly rated asset-backed securities comprising new consumer and small- business loans.

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