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The New York Fed reserves the right to reject any TALF loan request against legacy CMBS collateral based on an internal risk assessment.
Among other considerations, the risk assessment considers the stress value of the particular AAA CMBS under an extreme economic scenario, and compares that to the potential value of the TALF loan, which is based on the price less the applicable haircut.
The New York Fed continuously refines its risk assessment methodology in order to meet the program’s policy goals and low risk appetite. As a part of this process, an error was corrected in the stress valuation methodology. With respect to [four] legacy CMBS, the stress value of such CMBS under the corrected methodology would have been $ million greater than the aggregate value of the TALF loans that were made against such collateral.
Nevertheless, given the program’s conservative parameters, including the fact that all collateral must receive a AAA rating by at least two credit rating agencies and that borrowers must contribute capital in the form of a risk based haircut, no actual losses on any TALF loans are expected.
Based upon the corrections and other refinements to the risk assessment methodology, the following is a list of previously accepted CMBS that do not meet our current risk criteria at or around current price levels.
The list provided above does not preclude the New York Fed from rejecting any legacy CMBS in the future, whether or not such legacy CMBS were previously accepted.
The New York Fed will continue to refine the legacy CMBS risk assessment process, including the stress valuation methodology used to assess the creditworthiness of tendered legacy CMBS. We continue to project that a high proportion of CMBS that meet the objective eligibility criteria will be accepted for financing.
Accepted Legacy CMBS
The following table lists the legacy CMBS that were accepted as eligible collateral for the subscription date specified above. There can be no assurance that such legacy CMBS will be accepted as eligible collateral for any future subscription date.
The following table lists the legacy CMBS that were rejected as eligible collateral for the subscription date specified above. The legacy CMBS identified in this list were rejected by the New York Fed based on:
the explicit requirements specified for legacy CMBS in the TALF program terms and conditions, or
the New York Fed's risk assessment of the legacy CMBS, including an assessment of whether the stress value of the legacy CMBS exceeded the requested loan amount.
The legacy CMBS identified in this list do not include any legacy CMBS identified in a loan request that may have been rejected due to (a) the failure to properly complete a TALF loan request form, (b) the failure to provide a sales confirmation that meets the requirements of the MLSA, (c) borrower ineligibility, or (d) the New York Feds assessment of the reasonableness of the secondary market transaction price.