How are payments on eligible collateral allocated between the borrower and repayment of principal on the TALF loan?
Unless otherwise provided in the MLSA, any remittance of principal on eligible collateral must be used immediately to reduce the principal amount of the TALF loan in proportion to the haircut. For example, if the original haircut was 10 percent, 90 percent of any remittance of principal on the ABS must immediately be repaid to the New York Fed. For a five-year TALF loan, which is available for certain ABS categories, the excess of interest and any other distributions (excluding principal distributions) on the ABS over TALF loan interest payable (such amount, “net carry”) will be remitted to the TALF borrower only until net carry equals 25% per annum of the original haircut amount in the first three loan years, 10% in the fourth loan year, and 5% in the fifth loan year, and the remainder of such net carry will be applied to the TALF loan principal, as described more fully below. For a three-year TALF loan for legacy CMBS, such net carry will be remitted to the borrower in each loan year
Unless otherwise provided in the MLSA, any remittance of principal on eligible collateral must be used immediately to reduce the principal amount of the TALF loan in proportion to the haircut. For example, if the original haircut was 10 percent, 90 percent of any remittance of principal on the ABS must immediately be repaid to the New York Fed.
Related Questions
- How are principal payments on eligible collateral allocated between the borrower and repayment of principal on the TALF loan?
- If a TALF-financed ABS incurs a principal loss, would the loss be allocated between the borrower’s haircut and the TALF loan?
- How are payments on eligible collateral allocated between the borrower and repayment of principal on the TALF loan?
