DBRS Assigns Provisional Ratings to Impact Funding Affordable Multifamily Housing Mortgage Loan Trust 2014-1

DBRS has today assigned provisional ratings to the following classes of Affordable Multifamily Mortgage Loan Pass-Through Certificates, Series 2014-1 (the Certificates), to be issued by Impact Funding Affordable Multifamily Housing Mortgage Loan Trust 2014-1. The trends are Stable.

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-FXI at AAA (sf)
-- Class X-B at AAA (sf)
-- Class X-FX2 at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class F at B (sf)

Classes A-1, A-2, A-3, X-A and X-FXI represent the certificates that will be purchased and guaranteed by Freddie Mac and will be deposited into the SPC Trust to back the Offered SPCs.

Classes B, C, D, E, F, X-B and X-FX2 represent the non-guaranteed offered certificates.

All classes will be privately placed pursuant to Rule 144A.

The Class X balances are notional. DBRS ratings on interest-only (IO) certificates address the likelihood of receiving interest based on the notional amount outstanding. DBRS considers the IO certificates’ position within the transaction payment waterfall when determining the appropriate rating.

The collateral consists of 124 fixed-rate loans secured by 118 multifamily properties, for a total transaction balance of $215,216,599. The DBRS sample included 33 loans, representing 44.9% of the pool. The loans benefit from strong origination practices through the Impact platform, with Freddie Mac guaranteeing the AAA Classes and the tax credit investor having a vested interest in the continued performance of the properties. Within this Impact platform, there have been three rated securitizations since 2000 which together have an extremely low delinquency rate of only 0.04% as of June 2014. This compares very favorably with the delinquency rate for CMBS multifamily loans of approximately 4.74% for the same period. In addition, cash flow underwriting is prudent, as evidenced by an average DBRS net cash flow variance of -5.1% on the sampled loans.

The pool is concentrated by property type, with affordable multifamily properties representing 100% of the collateral; however, it is also very granular, based on loan size. The pool has a concentration profile of 82 equal-sized loans helping to insulate the higher-rated classes from event risk. Additionally, the leverage level is quite low, as evidenced by the strong DBRS Going-In and Exit Debt Yields of 11.4% and 16.7%, respectively. While the average remaining loan term for the pool is long at 208 months, 13% of the pool fully amortizes over the loan term and the overall pool amortizes by 42.5% over the loan term. This is further evidenced by the strong weighted-average DBRS Term and Refi DSCR of 1.41x and 1.99x.

Classes A-1, A-2, A-3 X-A and X-FX1 are being purchased by Freddie Mac and conveyed into separate trust funds. Freddie Mac will offer structured pass-through certificates (SPCs) that represent pass-through interests in Classes A-1, A-2, A-3, X-A and X-FX1. With respect to the SPCs, Freddie Mac guarantees: (1) timely payment of interest; (2) payment of related principal on the distribution date following the maturity date of each mortgage loan, to the extent such principal would have been distributed to the underlying Class A-1, A-2 and A-3 certificates; (3) reimbursement of any realized losses and additional trust fund expenses allocated to the Underlying Guaranteed Certificates; and (4) ultimate payment of principal by the assumed final distribution date for the underlying Class A-1, A-2 and A-3 certificates. Please see the press release titled “DBRS Assigns Provisional Ratings on Freddie Mac Structured Pass-Through Certificates, Series Q-001,” dated October 30, 2014, for further information on the SPCs.

The ratings assigned to the Certificates by DBRS are based exclusively on the credit provided by the transaction structure and underlying trust assets. All classes will be subject to ongoing surveillance, which could result in upgrades or downgrades by DBRS after the date of issuance.

Notes:
All figures are in U.S. dollars unless otherwise noted.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The applicable methodology is CMBS Rating Methodology, which can be found on our website under Methodologies.