The New York Federal Reserve posted a list of bonds that were accepted and rejected after the first subscription for Legacy CMBS Term ABS Loan Facility (TALF).
Bank of America/Merrill Lynch analysts said they are glad to see that the NY Fed listened to the market's call to disseminate the information to the market simultaneously. Although the Fed did not give the sizes of the loans for the bonds accepted or rejected, it did reveal the market price used on the accepted bonds.
According to the N.Y. Fed's release, it accepted 35 bonds and rejected only one, with all the bonds coming from the 2004 to 2008 vintages. The only bond to be rejected was JPMCC 2007-LDPX A2S.
Even though the N.Y. Fed did not discuss the exact reason for the bond's rejection, it did mention two possible general reasons for rejection in it a statement.
According to the N.Y. Fed, rejected bonds either did not meet the requirements of the TALF program or they were rejected based on the N.Y. Fed's risk assessment. It did not list bonds rejected for what BofA/Merrill analysts described as operational reasons, such as incomplete request form, inadequate sales confirm, borrower ineligibility or reasonableness of a secondary market price.
The current performance and industry perception of the credit characteristics of the transactions that were accepted covered a wide range. For instance, BofA/Merrill analysts said that two securities that were accepted have heavy exposure to the Peter Cooper & Stuyvesant Town loan — WBCMT 2007-C30 A2 and MLCFC 2007-5.
Three bonds come from deals where the current 60+-day delinquency rate is over 7% — including the GG1 deal where the delinquency rate is high because of two GGP loans that are listed as non-performing balloons.
Analysts also noted that there are also five deals where the watchlist percentage covers at least one-third of the outstanding balance.