Press Release

DBRS Morningstar Takes Rating Actions on 28 Freddie Mac-Issued CMBS Transactions

CMBS
October 20, 2020

DBRS, Inc. (DBRS Morningstar) conducted its surveillance review of 14 Freddie Mac commercial mortgage-backed security (CMBS) transactions and 14 Freddie Mac Structured Pass-Through Certificate transactions. Of the 170 classes across these 28 transactions, DBRS Morningstar confirmed its ratings on 158 classes with Stable trends and confirmed its ratings on two classes with Positive trends. The rating confirmations reflect the transactions’ overall stable performance, which has generally remained in line with DBRS Morningstar’s expectations at issuance.

In addition, DBRS Morningstar upgraded 10 classes with Stable trends. The rating upgrades reflect generally positive performance trends for the underlying loans and/or increased credit support for those bonds.

Overall, there are 1,014 loans secured across the 28 transactions with an aggregate outstanding balance of $18.5 billion as of September 2020. There is a sizable concentration of defeasance across the deal set as 8.2% of the loans are fully defeased. The only loan in special servicing is the Lifepointe Village loan (Prospectus ID#51), which is secured in the FREMF 2016-K57 Mortgage Trust, Series 2016-K57 transaction; as of September 2020, this loan was over 121 days delinquent. The loan is secured by a healthcare facility in Southaven, Mississippi, and reported a depressed YE2019 debt service coverage ratio (DSCR) prior to the Coronavirus Disease (COVID-19) pandemic. For more information on this loan, please visit the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com.

Excluding defeased loans, 9.4% of the remaining loans by outstanding loan balance across the 28 transactions are on the servicer’s watchlist because of deferred maintenance, forbearance granted for coronavirus-related mortgage-relief requests, and/or DSCR and occupancy declines. Twenty-four loans, representing 2.3% of the outstanding loan balance, have been flagged for forbearance requests. Generally, Freddie Mac initially granted a three-month forbearance for borrowers experiencing hardship related to the coronavirus, but extended the forbearance period by an additional three months as the effects of the pandemic lingered. Given the overall strengths of the Freddie Mac program and strong historical performance of the 28 individual transactions, DBRS Morningstar considered the forbearance requests to have minimal credit impact on each transaction.

As of June 2020, DBRS Morningstar developed a baseline rating scenario and sensitivity analyses for its rated conduit and agency multiborrower transactions to reflect the concerns and conditions surrounding the coronavirus pandemic. As a result of that analysis, DBRS Morningstar identified that none of the 28 transactions had higher concentrations of ongoing or baseline scenario risk factors. For more information, please see the commentary entitled “CMBS Conduit Exposure to Coronavirus Disease (COVID-19) Implications” published on June 29, 2020.

For a summary of the rating actions, please click the following link: https://www.dbrsmorningstar.com/research/368507.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

Classes that are interest-only (IO) certificates reference a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.

All ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

DBRS Morningstar provides updated analysis and in-depth commentary for these transactions, particularly at issuance, in the DBRS Morningstar Viewpoint platform.

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com. The platform includes loan-level data for most outstanding CMBS transactions (including non-DBRS Morningstar-rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

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

The principal methodology is North American CMBS Surveillance Methodology (March 6, 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria. For a list of the structured-finance-related methodologies that may be used during the rating process, please see the DBRS Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.com in the Commentary tab under Regulatory Affairs. Please note that not every related methodology listed under a principal structured finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS Morningstar long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

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

DBRS, Inc.
22 West Washington Street
Chicago, IL 60602
Tel. +1 312 696-6293

Ratings

FREMF 2015-K42 Mortgage Trust, Series 2015-K42
FREMF 2015-K48 Mortgage Trust, Series 2015-K48
FREMF 2015-K51 Mortgage Trust, Series 2015-K51
FREMF 2015-K718 Mortgage Trust, Series 2015-K718
FREMF 2016-K52 Mortgage Trust, Series 2016-K52
FREMF 2016-K55 Mortgage Trust, Series 2016-K55
FREMF 2016-K57 Mortgage Trust, Series 2016-K57
FREMF 2016-K723 Mortgage Trust, Series 2016-K723
FREMF 2017-K61 Mortgage Trust, Series 2017-K61
FREMF 2017-K63 Mortgage Trust, Series 2017-K63
FREMF 2017-K64 Mortgage Trust, Series 2017-K64
FREMF 2017-K69 Mortgage Trust, Series 2017-K69
FREMF 2017-K724 Mortgage Trust, Series 2017-K724
FREMF 2017-K729 Mortgage Trust, Series 2017-K729
Freddie Mac Structured Pass-Through Certificates, Series K-042
Freddie Mac Structured Pass-Through Certificates, Series K-048
Freddie Mac Structured Pass-Through Certificates, Series K-051
Freddie Mac Structured Pass-Through Certificates, Series K-052
Freddie Mac Structured Pass-Through Certificates, Series K-055
Freddie Mac Structured Pass-Through Certificates, Series K-057
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  • US = Lead Analyst based in USA
  • CA = Lead Analyst based in Canada
  • EU = Lead Analyst based in EU
  • UK = Lead Analyst based in UK
  • E = EU endorsed
  • U = UK endorsed
  • Unsolicited Participating With Access
  • Unsolicited Participating Without Access
  • Unsolicited Non-participating

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.

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