The Federal Reserve (the Fed) and the U.S. Treasury Department are extending Term Asset-Backed Securities Loan Facility (TALF) activities. TALF financial programs will support the secondary mortgage market for income property mortgage-backed securities through June 30, 2010. Bond market pools backed by auto, credit card, student, and small business loans are extended through March 31, 2010.

The extension of TALF is driven by the realization that the continued slump in real estate is causing rents to fall and sales prices to decline. Thus the extension is designed to support prices.

TALF is praised as a program lowering some consumer borrowing costs and sparking securities market rallies.

first tuesday take: The Fed is doing what it must do in any financial crisis.  With the outlook dismal for refinancing income-producing real estate as great numbers of short-term commercial loans come due, the Fed is pumping new money into mortgage lenders of all types. Keep in mind the Fed will withdraw (as it must) the extra cash it has injected into financing at the first sign of consumer inflation (as it did in 1985 and 1995 following its infusions of cash in those recessions) or asset inflation, which they have decided to monitor.

Estimated time of withdrawal and resulting higher mortgage rates: based on the time delay that followed the 1980-81 and 1900-91 recessions, sometime during the fourth quarter of 2010 and first quarter of 2011.

Re: “Real estate lifeline extended through mid-2010,” from CNN Money.