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Investors have finally warmed up to the Federal Reserve's consumer lending program, with nearly $10 billion in eligible new issuance slated for sale ahead of Tuesday's loan application deadline.

This is a notable increase over issuance seen in the first two months of the Fed's Term Asset-Backed Securities Loan Facility, or TALF, when investor wariness kept many on the sidelines.

"The fact that we've seen almost $10 billion worth of transactions in the latest round is a strong indication that the program is gaining momentum," said Joe Astorina, a consumer asset-backed securities analyst at Barclays Capital in New York.

TALF-eligible issuance stood at $8.2 billion in March and just $2.57 billion in April.

TALF is one of the Fed's cornerstone programs aimed at jump starting consumer lending. Investors apply for loans to finance bonds backed by credit cards, student loans, and other consumer loans once a month. Issuers have clustered bond sales around the loan application deadline, which is the first Tuesday of the month.

On Monday, a small group of investors asked JP Morgan Chase & Co. (JPM) to put together a credit offering backed by credit card loans that is eligible for the Fed's TALF.

That $5 billion deal - the largest yet of TALF-eligible offerings, according to Barclays Capital - is expected to price later Monday. One market participant said the deal was oversubscribed.

JP Morgan, which is underwriting the deal, didn't return phone calls seeking comment.

Five other deals, including General Electric's (GE) $1 billion credit card-backed deal, are due to be sold Tuesday, the deadline for the Fed's non-recourse loans under TALF.

CNH Global NV (CNH), the agricultural and construction equipment unit of Fiat SpA (FIATY), increased the size of its offering to $1 billion on Monday from an original $780.6 million. Honda Motor Co. (HMC) has a $1.25 billion bond, Volkswagen AG (VLKAY) has a $1 billion issue and motorcycle company Harley Davidson (HOG) has a $500 million deal.

The Fed has had to cajole investors to participate in the program and has had to make several changes in order to gain traction. Most recently, it increased the duration of some loans to five from three years and broadened eligible collateral.

The facility, announced in November, was launched only in March and received a lukewarm response.

In its inaugural round, the Fed only received applications for $4.7 billion of loans to finance investor purchases of TALF-eligible bonds. That number plummeted to $1.7 billion in April.

Investors complained about onerous documentation, the possibility of congressional meddling if they made significant profits using the Fed's loans and curbs on hiring foreign nationals.

Even though the central bank has been fine-tuning the program, several large firms have "mothballed plans to participate," because they still aren't fully comfortable with the program, said David Morton, a partner at Rocaton Investment Advisors in Norwalk, Conn., with $200 billion in assets under advisement. "They fear a public spotlight if they make money off the program."

That said, market participants expect issuance to pick up even more before the June loan application deadline as investors decide the gains to be made through the program are too large to ignore.

"The signs are encouraging," said Jim Harrington, senior portfolio manager at Ryan Labs Asset Management in New York, which is helping investors participate in TALF. "As momentum picks up and spreads tighten, investors will not want to miss out."

-By Anusha Shrivastava, Dow Jones Newswires; 201-938-2371; anusha.shrivastava@dowjones.com