The Term Asset-Backed Securities Loan Facility (TALF) was recently expanded to include commercial mortgage backed securities (CMBS). These loans are to be made on a a non-recourse basis: The Fed can't go after any other assets of the borrowing institutions aside from the pledged assets. In other words, if the assets that the borrower is funding tank, they can walk away and let The Fed clean up the mess. The Fed has all of the credit risk but limited profit potential. This is not what a central bank should be up to.
As a result, CMBS have rallied off their lows since there will be a lender of last resort. However, there is smoke on the horizon:
Coming soon: a wave of CMBS downgradeshttp://ftalphaville.ft.com/blog/2009/05/26/56245/brace-yourselves-for-a-wave-of-cmbs-downgrades/
In order to be eligible, the CMBS must have a AAA rating from at least 2 rating agencies. From the way it sounds, S&P is prepared to dramatically reduce the number of AAA ratings they have assigned. So much for the TALF......