By Al Yoon

NEW YORK, July 7 (Reuters) - The Federal Reserve's program to boost U.S. commercial real estate lending may be tailored with such narrow specifications that its impact may fall far short of easing the sector's pain.

The Fed next week will launch a long-awaited lending program for investors that pledge to buy commercial property bonds that help finance office, retail and apartment buildings buffeted by the credit crunch. The two part program will offer loans against new and old commercial mortgage-backed securities in bid to draw investor demand and lower borrowing rates.

Lower financing costs are key to slowing the deterioration of credit for commercial loans that are heading into distress at a heady pace. Without easier credit, defaults will rise and prolong a viscious cycle of foreclosures and price declines.

But controversy has erupted over limits placed on investors asking for funding for purchases of existing bonds, whose rates help set new lending costs.

Disputed is a mandate for bonds to carry only stable AAA ratings, which is eliminating a huge chunk of the $700 billion market due to fresh downgrade threats by Standard & Poor's.

On Thursday, the Fed said bonds eligible for the Term Asset Backed Securities Loan Facility (TALF) must have trade dates of July 2 or later, further narrowing eligibility.

Calls among investors and analysts for the Fed to ease its criteria have so far gone unheeded.

"The ball is in the Fed's court to make CMBS TALF work," said Craig Lieberman, a managing director of commercial real estate at NewOak Capital LLC in New York. "It's an extremely important program to get right" to rescussitate the market, he said.