DBRS Morningstar Assigns MOR CS2 Commercial Mortgage Special Servicer Ranking to Freddie Mac Multifamily Asset Management and Operations

DBRS, Inc. (DBRS Morningstar) assigned a MOR CS2 commercial mortgage special servicer ranking to Freddie Mac Multifamily Asset Management and Operations (Freddie Mac or the Company). The trend on the ranking is Stable. Before completing its consolidation with DBRS, Inc. this year, Morningstar Credit Ratings, LLC maintained an MOR CS2 special servicer ranking for Freddie Mac.

The MOR CS2 special servicer ranking reflects Freddie Mac’s highly experienced staff and strong operational depth; sound internal audit, governance, and compliance programs; and successful performance history resolving a relatively low volume of specially serviced multifamily assets. A companywide early retirement initiative this year led to some elevated employee turnover, though the multifamily surveillance and special servicing teams were only moderately affected. Through internal promotions and other realignments, the Company has maintained stability with a well-tenured leadership team.

Freddie Mac demonstrates proactive and thorough surveillance and asset resolution analytics, especially with respect to assessing and executing forbearances and other payment relief requests emanating from the Coronavirus Disease (COVID-19) pandemic. The ranking also acknowledges the Company’s effective technology applications and ongoing initiatives to streamline applications and enhance operational effectiveness.

As of June 30, 2020, Freddie Mac was the named special servicer on nine of its securitizations, which had 135 remaining loans with an aggregate $6.31 billion unpaid principal balance (UPB). The Company also serves as special servicer for its balance sheet loan portfolio, which contained 3,978 loans with a total UPB of $55.22 billion.

As of June 30, 2020, the active special servicing volume (all contained in its balance sheet portfolio) totaled $205.9 million by UPB and consisted of 23 loans (five nonperforming loans with a total UPB of $29.3 million and 18 performing loans with a total UPB of $176.6 million) on heightened surveillance. During the first six months of 2020, the Company resolved 15 specially serviced loans with a total UPB of approximately $394 million consisting of eight modifications and seven full payoffs. The portfolio has not contained any real estate owned (REO) properties since early 2018, but Freddie Mac has managed and sold a few REO assets over the years with overall solid recovery results.

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

DBRS Morningstar North American commercial mortgage servicer rankings are not credit ratings. Instead, they are designed to evaluate the quality of the parties that service commercial mortgage loans. Although the servicer’s financial condition contributes to the applicable ranking, its relative importance is such that a servicer’s ranking should never be considered as a proxy of its creditworthiness.

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

The principal methodology is North American Commercial Mortgage Servicer Rankings (October 20, 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

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.

For more information on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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