DBRS Morningstar Takes Ratings Actions on 34 Freddie Mac-Issued CMBS Transactions

DBRS, Inc. (DBRS Morningstar) conducted its surveillance review of 127 classes from 17 Freddie Mac commercial mortgage-backed security (CMBS) transactions and 67 classes from 17 Freddie Mac Structured Pass-Through Certificate transactions. DBRS Morningstar confirmed its ratings on 172 classes across all of the transactions and upgraded its ratings on 22 classes across seven transactions. The rating confirmations reflect the transactions’ overall stable performance, which has generally remained in line with DBRS Morningstar’s expectations at issuance. The rating upgrades were primarily the result of increased defeasance, loan payoffs, and amortization since issuance. All classes carry Stable trends.

Overall, there are 1,149 loans secured across the 17 transactions with an aggregate outstanding balance of $21.6 billion as of August 2021. There are two loans, totaling $66.4 million (0.3% of the aggregate outstanding balance), in special servicing and 168 loans, totaling $2.3 billion, that have defeased. As of August 2021, only a single loan across the transactions was delinquent. Additionally, 104 loans, or 9.3%, were on the servicers’ watchlists for a variety of reasons including deferred maintenance, storm damage, forbearance granted for Coronavirus Disease (COVID-19)-related mortgage relief requests, and debt service coverage ratio and occupancy declines at the subject properties.

Of the 104 watchlisted loans, 16 (representing 0.8% of the aggregate outstanding balance) have been flagged for forbearance requests. Generally, Freddie Mac initially granted a three-month forbearance for borrowers experiencing hardships related to the coronavirus, but, in some cases, Freddie Mac extended the forbearance and repayment periods. Given the overall strengths and strong historical performance of the 17 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, DBRS Morningstar identified that none of the 17 transactions had higher concentrations of ongoing or baseline scenario risk factors. For more information, please see the commentary titled “CMBS Conduit Exposure to Coronavirus Disease (COVID-19) Implications,” published on June 29, 2020.

For a summary of the transaction-level commentary, please click the following link:
https://www.dbrsmorningstar.com/research/385109.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

DBRS Morningstar materially deviated from its quantitative model when determining the rating assigned to Class B of the FREMF 2017-K729 transaction by assigning a rating lower than the implied ratings suggesting by the quantitative model. The material deviation is warranted given uncertain loan level event risk.

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 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 26, 2021), 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.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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.

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 USA
Tel. +1 312 332-3429