The US Federal Reserve’s attempts to jump-start the commercial mortgage lending market using its Talf scheme are understandable but misguided. Its initial decision to make just new triple-A CMBS issuance Talf-eligible was optimistic if nothing else, given that there has not been a new CMBS deal in the US for two years. The next step was the inclusion of legacy triple-A CMBS, which certainly stirred the market’s interest. But it was blindsided by Standard & Poor’s announcement on May 26 that changes to its methodology could result in up to 90% of outstanding triple-A CMBS paper – or $235 billion of debt – being downgraded.
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