The New York Federal Reserve rejected three bonds for the November Legacy CMBS Term ABS Loan Facility (TALF) subscription, while accepting 60.

The three tranches rejected this month were: BACM 2005-5 A4; BACM 2007-2 A2; and CD 2007-CD5 A4, the Fed said

According to a report from Bank of America Merrill Lynch, all three of this month's rejections had been, at one point, accepted collateral under TALF.

Some bonds, analysts said, were even accepted multiple times and two bonds as recently as last month.

"We have seen little change from a credit perspective over the past month for the two bonds accepted last month (BACM 2005-5 A4 and 2007-2 A2) that would warrant rejection," BofA Merrill analysts wrote.

A possible explanation, they said, is that the Fed rejected certain tranches since it already has too much exposure to certain transactions or certain tranches within a deal.

The Fed, analysts speculated, might be using a combination of concentration and credit risk metrics to decide what collateral is acceptable. However, they said that without further information, it is impossible to be certain that this is the rationale behind the rejections.

BofA Merrill analysts are still asking the Fed to release more information. They would like to see, most importantly, the Fed dislcose the reasons for the bonds' rejection.

"The market's reaction will be interesting, but barring further information from the Fed about their methodology, giving program participants some insight into the probability of acceptance or rejection, we would expect Legacy TALF applications to stall or even head lower, as investors grow increasingly concerned about acceptable collateral," BofA Merrill analysts wrote.

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