Morningstar DBRS Discontinues Credit Rating on One Class and Confirms Ratings on All Other Classes of Arbor Multifamily Mortgage Securities Trust 2022-MF4

DBRS Limited (Morningstar DBRS) discontinued its credit rating on Class A1 of the Multifamily Mortgage Pass-Through Certificates, Series 2022-MF4 issued by Arbor Multifamily Mortgage Securities Trust 2022-MF4 as it was repaid with the June 2024 remittance.

In addition, Morningstar DBRS confirmed its credit ratings on the remaining classes as follows:

-- Class A2 at AAA (sf)
-- Class A3 at AAA (sf)
-- Class A5 at AAA (sf)
-- Class ASB at AAA (sf)
-- Class AS at AAA (sf)
-- Class B at AAA (sf)
-- Class XA at AAA (sf)
-- Class C at AA (low) (sf)
-- Class D at A (low) (sf)
-- Class XD at A (low) (sf)
-- Class E at BBB (high) (sf)

All trends are Stable. The credit rating confirmations reflect minimal changes to the overall performance of the underlying collateral, which remains in line with Morningstar DBRS' expectations since issuance.

The subject transaction is composed of 29 loans secured by 39 multifamily properties. Given the recent vintage and limited seasoning, there has been negligible collateral reduction as all loans but one have partial- or full-term interest-only (IO) periods. At issuance, the pool had a Morningstar DBRS weighted-average (WA) debt service coverage ratio (DSCR) and a loan-to-value ratio of 1.62 times (x) and 68.9%, respectively. According to the YE2023 financials, the pool reported a WA DSCR of 2.16x, with a majority of the pool reporting cash flow growth from issuance levels.

According to the June 2024 remittance, there are no loans in special servicing and eight loans, representing 28.3% of the pool, are being monitored on the servicer's watchlist. Out of the eight loans on the watchlist, five are being monitored for outstanding deferred maintenance items, while the servicer is monitoring the remaining three for cash flow declines or late debt service payments. In the analysis for this review, Morningstar DBRS increased the probabilities of default for select loans that are reporting notable cash flow declines from issuance levels, resulting in a WA expected loss approximately 50.0% greater than the pool average.

As of the June 2024 remittance, one loan, previously representing 1.9% of the pool, was repaid in full ahead of its originally scheduled maturity date. The loan had previously been transferred to special servicing in April 2024 for monetary default with a breach of representations and warranties occurring because the property is not "free and clear" of a recorded encumbrance at origination. Because of the breach of representations and warranties, the loan seller repurchased the loan from the trust, resulting in a total collateral reduction of 2.1% since issuance and the full repayment of Class A-1 with the June 2024 remittance.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS   
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.
 
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (January 23, 2024) at: https://dbrs.morningstar.com/research/427030.

Classes XA and XD are IO certificates that 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 credit ratings are subject to surveillance, which could result in credit ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by Morningstar DBRS.

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

The principal methodology is North American CMBS Surveillance Methodology (March 1, 2024), https://dbrs.morningstar.com/research/428798.

Other methodologies referenced in this transaction are listed at the end of this press release.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at [email protected].

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

North American CMBS Multi-Borrower Rating Methodology (March 1, 2024)/North American CMBS Insight Model v 1.2.0.0, https://dbrs.morningstar.com/research/428797.

Rating North American CMBS Interest-Only Certificates (December 13, 2023), https://dbrs.morningstar.com/research/425261.

DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria (September 22, 2023), https://dbrs.morningstar.com/research/420982.

North American Commercial Mortgage Servicer Rankings (August 23, 2023), https://dbrs.morningstar.com/research/419592.

Legal Criteria for U.S. Structured Finance (April 15, 2024), https://dbrs.morningstar.com/research/431205.

A description of how Morningstar DBRS analyzes structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/417279.

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at [email protected].