DBRS Releases Commentary on Variant Performances of Freddie Mac and Conduit Multifamily Loans

DBRS Limited (DBRS) has today released a commentary comparing the performance of multifamily loans in Freddie Mac and traditional multi-borrower conduit CMBS transactions, which supports DBRS’s viewpoint that K-Series multifamily loans should be treated differently from conduit multifamily loans, given the substantial differences in cash flow performance and issuance debt yield.

The delinquency rate for K-Series loans has remained lower than 0.1% since 2011 while that of peer CMBS 2.0/3.0 multifamily loan has remained at around 1.0% during the same period. DBRS observes stronger cash flow growth and lower cash flow volatility in the K-Series multifamily loans between 2011 and 2016 and believes that it contributes to the lower delinquency rate. Moreover, empirical data also shows that K-Series multifamily loans were issued with lower debt yields in a consistent way, which indicates higher-quality properties, sponsors and markets present.

The DBRS “North American CMBS Multi-borrower Rating Methodology” was updated on March 23, 2017, to reflect these findings. See the DBRS press release, “DBRS Publishes Updates to CMBS Multi-borrower Rating Methodology” for additional details.

Notes:
The data and research in the commentary are gathered from K-Series and multi-borrower conduit CMBS transactions originated after 2009 using the DBRS proprietary CMBS database and CMBS.com.

A copy of this commentary is available by contacting us at info@dbrs.com.

For more information on this study or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.