Bank of America/Merrill Lynch is in the market with a $1.995 billion auto loan-backed deal, according to a person familiar with the matter.

The deal is eligible for a Federal Reserve program, the Term Asset Backed Securities Loan Facility, or TALF, through which investors can procure cheap loans to buy newly created consumer loan-backed and new and existing commercial mortgage-backed bonds.

Bank of America's deal, dubbed BAAT 2009-2, is jointly led by Bank of America/Merrill Lynch, Barclays Capital, Citigroup, Credit Suisse and Royal Bank of Scotland. The deal is likely to be sold on Sept. 2, a day ahead of the next loan application deadline for the consumer loan-backed portion of TALF. For CMBS, the deadline is Sept. 17. Last month, Bank of America (BAC) sold a $3.993 billion auto-loan backed deal at 135 basis points over a benchmark. That was the bank's first deal eligible under TALF.

TALF was set up in March to revitalize the securitization market, shuttered following the bankruptcy of Lehman Brothers Holdings Inc. (LEHMQ). That market, in which banks sell loans packaged as securities on to investors, is vital in keeping credit flowing to the broader economy.

Initially targeted at securities backed by consumer loans, TALF was expanded to include commercial mortgage loan-backed bonds. The program was set to expire Dec. 31; last week, the central bank and the Treasury Department extended their support, citing "impaired" conditions in financial markets.

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 take a significant amount of time to put together, the extension is until June 30, 2010.

Since the launch of the program, $85.45 billion in consumer loan-backed deals have been sold, the bulk of it using non-recourse loans at attractive rates from the Fed.

Besides reviving issuance, TALF has also revived investors' appetite: recently, ABS deals have been increased to $5 billion as investors took advantage of the Fed's cheap loans. That is reminiscent of the pre-crisis days, when deals were regularly increased in size to the $6-billion to $10-billion range.

There have been no new CMBS deals but some are said to be in the works.

-By Anusha Shrivastava, Dow Jones Newswires; 212-416-2227; anusha.shrivastava@dowjones.com