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To what values will the haircuts be applied to determine the maximum loan amount?

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To what values will the haircuts be applied to determine the maximum loan amount?

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Under the TALF, the New York Fed will lend to each borrower an amount equal to the lesser of the par or market value of the pledged ABS minus a haircut. Alternatively, when the pledged ABS has a market value above par, the New York Fed will lend an amount equal to the market value — subject to a cap of 110 percent of par value — minus a haircut, and the borrower will periodically prepay a portion of the loan. The prepayments will be calculated to adjust for the expected reversion of market value toward par value as the ABS matures.

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