Morningstar DBRS Takes Credit Rating Actions on 68 Freddie Mac Transactions and Nine ReREMIC Transactions

On April 9, 2025, DBRS, Inc. (Morningstar DBRS) finalized an update to its "North American CMBS Multi-Borrower Rating Methodology" (the Methodology) and updates to its North American CMBS Insight Model (the Model). The Methodology and Model present the criteria for which credit ratings on commercial mortgage-backed security (CMBS) transactions, including multi-borrower conduit (MB Conduit), agency, commercial real estate collateralized loan obligation (CRE CLO), small balance commercial (SBC), single-family rental (SFR), and other transactions secured by pools of commercial mortgage loans, are assigned and/or monitored. To identify transactions for which these updates could potentially affect credit ratings, Morningstar DBRS conducted an analysis that included a model-to-model comparison across the affected transaction types within its rated book and an identification of transactions with meaningful changes in the pool composition or risk profile since the last credit rating action. This press release addresses the credit rating actions resulting from the analysis on the agency transactions; for further information on the credit rating actions on the MB Conduit, CRE CLO, SBC, and SFR transactions, please see the press release titled "Morningstar DBRS Takes Credit Rating Actions on 112 CMBS Transactions Affected by the Finalization of the North American CMBS Multi-Borrower Rating Methodology and Updates to the CMBS Insight Model," published on May 1, 2025.

The updates to the Methodology and Model follow a review of historical data used to calibrate the probability of default (POD) and loss given default (LGD) regressions as well as updated performance data following the coronavirus pandemic. The framework for the Model remains largely the same; however, Morningstar DBRS expanded certain categories or bins within the variables and/or removed variables that were no longer impactful. For more information on updates to the Methodology and Model, please refer to the press released titled "Morningstar DBRS Publishes Final North American CMBS Multi-Borrower Rating Methodology and CMBS Insight Model," published on April 9, 2025. The Methodology and Model supersede the prior version published on December 13, 2024.

Morningstar DBRS conducted a model-to-model comparison of the class-level results with the previous Model and the updated Model. Based on that analysis, Morningstar DBRS identified a total of 138 classes in 39 transactions in its rated book of agency transactions that have potential credit ratings impact related to the updates to the Methodology and Model. The threshold for potential credit ratings impact was a material deviation from the credit ratings implied by the Model when compared against the updated capital stacks for each transaction to reflect repayment, defeasance and, where applicable, liquidated losses as further described below.

Given that the most recent bulk surveillance credit rating action for agency transactions occurred in October 2024, Morningstar DBRS elected to address all agency transactions, including those showing no potential credit ratings impact, with this credit rating action. In total, Morningstar DBRS addressed 401 classes from 68 Freddie Mac CMBS transactions (Freddie Mac K-Series transactions), 250 classes from 68 Freddie Mac Structured Pass-Through Certificate transactions, and 93 classes from nine ReREMIC transactions. Of the 744 classes across the three transaction types, Morningstar DBRS confirmed its credit ratings on 547 classes, upgraded 187 classes, and discontinued 10 classes because of repayment. In one ReREMIC transaction, Morningstar DBRS also changed the trends on three classes to Stable from Negative. All other trends are Stable. The full list of the credit ratings on each class, along with the performance metrics for these transactions, is available at the end of this press release.

The credit rating actions reflect Morningstar DBRS' expanded review process as outlined in the "North American CMBS Surveillance Methodology" (the Surveillance Methodology), published on February 28, 2025. Based on the March 2025 remittance reports, Morningstar DBRS analyzed the affected transactions to identify changes since the most recent Morningstar DBRS credit rating action for each. Applicable changes included developments such as loan repayments, increased defeasance, cash flow and/or occupancy changes for the collateral properties, new values for loans in special servicing, or additions to the servicer's watchlist. Morningstar DBRS also incorporated a stressed refinance analysis scenario for all loans, which considered the property's performance trajectory as well as interest rates in the current lending environment to identify loans that may have increased maturity default risk. Where loans were exhibiting performance declines from issuance and/or were reporting metrics that suggested increased refinance risk in the analysis, Morningstar DBRS made POD adjustments on a sliding scale, with the severity of the POD penalty increasing based on the specifics of the increased risks. In certain cases, Morningstar DBRS also made LGD adjustments to reflect concerns surrounding potential performance-based value declines since issuance.

The analysis generally reflected that (1) all defeased loans were excluded from the Model runs and were liquidated at 100% recovery; and (2) specially serviced loans that were expected to be resolved with a loss to the respective trusts were also excluded from the Model runs and were liquidated based on recent information, such as updated appraised values. The combination of these two exclusions resulted in a liquidated credit enhancement for the bond stack, which Morningstar DBRS compared with the multiple ranges referred to in the Methodology. Morningstar DBRS then overlaid this analysis with the stressed refinance analysis scenario on a cumulative basis to measure each transaction's exposure to potential increased refinance risk.

The credit rating actions included nine ReREMIC transactions collateralized by underlying Freddie Mac K-Series transactions, some of which Morningstar DBRS does not rate. The credit ratings depend on the performance of the underlying transactions. In general, the Freddie Mac K-Series transactions exhibited healthy performance metrics evidenced by a weighted-average (WA) debt service coverage ratio (DSCR) exceeding 2.05 times (x) based on the most recent financials. Based on the March 2025 remittance reports, only five Freddie Mac K-Series transactions had delinquent and/or specially serviced loans, with the largest concentration representing 2.4% of the subject pool balance. In addition, realized losses across all transactions have been minimal to date and total defeasance was approximately 10.7% of the aggregate principal amount, with transaction-level defeasance concentrations ranging from 0.0% to 52.8%.

Loans on the servicer's watchlist totaled approximately 9.7% of the aggregate principal amount, ranging from 0.0% and 47.8% for the respective transaction pool balance. The two deals with the largest concentrations of loans on the servicer's watchlist are FREMF 2015-K48 Mortgage Trust, Series 2015-K48 and FREMF 2019-K734 Mortgage Trust, Series 2019-K734. The majority of loans on the servicer's watchlist in each transaction have been flagged for upcoming maturity. Morningstar DBRS expects transactions with upcoming concentrations of loans scheduled to mature throughout 2025 to similarly result in increased numbers of loans on the servicer's watchlist; however, Morningstar DBRS does not deem this to be an increased credit risk for transactions as a whole because most borrowers are expected to successfully execute loan exit strategies by selling properties or securing refinance debt. For more information of the performance metrics for each deal, please refer to Appendix B at the end of this press release.

Morningstar DBRS also applied its criteria for rating CMBS interest-only (IO) certificates (referenced in the previously stand-alone "Rating North American CMBS Interest-Only Certificates" methodology, which was incorporated into the Methodology, the Surveillance Methodology, and the "North American Single-Asset/Single-Borrower Ratings Methodology" in December 2024). Credit rating changes on the applicable reference obligations may have also triggered a credit rating action on the CMBS IO certificate.

A summary of the credit rating actions, along with the credit rating action for each class, is available at the following link: https://dbrs.morningstar.com/research/453248

A summary of the performance metrics for each rated Freddie Mac K-Series transaction along with nonrated Freddie Mac K-Series transactions tied to ReREMICs is available at the following link: https://dbrs.morningstar.com/research/453249

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

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 Factors in Credit Ratings (August 13, 2024) at https://dbrs.morningstar.com/research/437781

Classes that are interest-only (IO) certificates reference a single rated tranche or multiple rated tranches. The IO credit 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 (February 28, 2025), https://dbrs.morningstar.com/research/448963

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

The credit ratings assigned to two classes materially deviate from the credit ratings implied by the predictive model. Morningstar DBRS typically expects there to be a substantial likelihood that a reasonable investor or other user of the credit ratings would consider a three-notch or more deviation from the credit rating stress(es) implied by the predictive model to be a significant factor in evaluating the credit ratings. The rationale for the material deviations is uncertain loan-level event risk.
-- BMD2 RE-REMIC Trust 2019-FRR1: Class 2C Certificates
-- GAM RE-REMIC Trust 2021-FRR2: Class D730

The credit ratings were initiated at the request of the rated entities.

The rated entities or their related entities did participate in the credit rating process for these credit rating actions.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entities or their related entities in connection with these credit rating actions.

These are solicited credit ratings.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

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

DBRS, Inc.
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Chicago, IL 60602 USA
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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 (April 9, 2025) and North American CMBS Insight Model v 1.3.0.0, https://dbrs.morningstar.com/research/451739
-- North American Commercial Mortgage Servicer Rankings (August 23, 2024), https://dbrs.morningstar.com/research/438283
-- Legal Criteria for U.S. Structured Finance (December 3, 2024), https://dbrs.morningstar.com/research/444064
-- Morningstar DBRS Commercial Real Estate Property Analysis Criteria (September 19, 2024), https://dbrs.morningstar.com/research/439702

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.