In June, a week after the Federal Reserve announced it would expand TALF to include AAA CMBS, S&P warned it would change to its ratings model and downgrade tens of billions of dollars of these 2007 vintage securities. The move, which S&P subsequently carried out, effectively eliminated these assets as eligible criteria for the program. One of TALF's requirements is that two rating agencies independently rate a security AAA.

Then, S&P reversed itself again and upgraded them back to AAA last week.

The change was a welcome development, to state the obvious. But it also is giving real estate investors and originators pause during a crucial time: that is, as traction is developing to use TALF for CMBS deals. S&P did not return a call to GlobeSt.com in time for publication.

"The whole event was bizarre and looked a little suspicious," David Webb, managing director in Cassidy & Pinkard Colliers' Capital Markets group, tells GlobeSt.com. "It almost looks as though they were pressured by somebody to change the rating."

In published reports, S&P explained that it received a huge number of complaints from bondholders and thus decided to reevaluate its rating methodology. Indeed, there is a legitimate case to be made that many of these securities were in little danger of default.

Still, though, the flip flop – not to mention the rating agencies' past performance – has rattled nerves.

"It erodes the creditability of the rating agency if people think they are subject to outside influences," Webb says.

More than likely, Webb speculates, the change was a case of overcompensation on the part of the rating agency. "It seems as though they are trying to correct for past mistakes – but now they are being too conservative."

Webb says he has heard that rating for proposed new CMBS – several of which are trying to come to market now – has been ridiculously low, with LTVS in the 30% range. "I think it will be natural to go through a period of time where the rating agencies overreact."

The shift, though, could have an impact on TALF, just as it is ramping up to be used for CMBS assets, says David Akeman, director of Capital Markets for Stan Johnson Co. "Investors will think twice about investing in assets should the S&P downgrade again," he tells GlobeSt.com. For this reason, the re-upgrade to AAA of the 2007 securities will not spur CMBS activity, Akeman says. "All it has done is create a ton of confusion because now nobody knows what is going on."