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If a TALF-financed ABS incurs a principal loss, would the loss be allocated between the borrower’s haircut and the TALF loan?

April 26, 2017ABS allocated borrower haircut incurs loan loss Principal talf talf-financed

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If a TALF-financed ABS incurs a principal loss, would the loss be allocated between the borrower’s haircut and the TALF loan?

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No. The borrower is responsible for all interest and principal payments on a TALF loan. If the borrower does not make these payments, the New York Fed will enforce its rights to the collateral and the borrower will forfeit its haircut amount.