Fitch Rates FREMF 2014-K36 Multifamily Mtge PT Ctfs and Freddie Mac SPC, Ser K-036

NEW YORK--()--Fitch Ratings has rated FREMF 2014-K36 Multifamily Mortgage Pass-Through Certificates and Freddie Mac Structured Pass-Through Certificates, Series K-036 as follows:

FREMF 2014-K36 Multifamily Mortgage Pass-Through Certificates

--$194,823,000 class A-1 'AAAsf'; Outlook Stable;

--$865,353,000 class A-2 'AAAsf'; Outlook Stable;

--$1,060,176,000* class X1 'AAAsf'; Outlook Stable;

--$1,060,176,000* class X2-A 'AAAsf'; Outlook Stable;

--$69,005,000 class B 'Asf'; Outlook Stable;

--$31,366,000 class C 'BBB+sf'; Outlook Stable.

Freddie Mac Structured Pass-Through Certificates, Series K-036

--$194,823,000 class A-1 'AAAsf'; Outlook Stable;

--$865,353,000 class A-2 'AAAsf'; Outlook Stable;

--$1,060,176,000* class X1 'AAAsf'; Outlook Stable.

*Notional amount and interest only.

Fitch did not rate the following classes of FREMF 2014-K36: the $194,470,379 interest-only class X2-B, the $194,470,379 interest-only class X3, or the $94,099,379 class D. Fitch did not rate the $194,470,379 class X3 of the Structured Pass-Through Certificates, Series K-036.

The certificates represent the beneficial interests in a pool of 76 commercial mortgages secured by 76 properties. The Freddie Mac Structured Pass-Through Certificates, Series K-036 (Freddie Mac SPC K-036) represents a pass-through interest in the corresponding class of securities issued by FREMF 2013-K36. Each Freddie Mac SPC K-036 security has the same designation as its underlying FREMF 2014-K36 class. All loans were originated by various seller/servicers according to the guidelines of the Freddie Mac Capital Markets Execution (CME) product. The certificates follow a sequential-pay structure.

Fitch reviewed a comprehensive sample of the transaction's collateral, including site inspections on 82.4% of the properties by balance and cash flow analysis of 78.2% of the pool.

The transaction has a Fitch stressed debt service coverage ratio (DSCR) of 1.30x, a Fitch stressed loan-to value (LTV) of 102.3%, and a Fitch debt yield of 9.4%. Fitch's aggregate net cash flow represents a variance of 7.8% to issuer cash flows.

KEY RATING DRIVERS

Fitch Leverage: The Fitch stressed LTV ratio is 102.3%, and is below the average of 2013 Fitch-rated, 10-year, K-Series Freddie Mac deals, which averaged 112.8%. The Fitch stressed DSCR, at 1.30x, is above the average of 1.12x for the 2013 Fitch-rated, 10-year, K-series Freddie Mac deals.

Cooperative Multifamily Housing Concentration: Five loans (4.4%) in the pool are secured by co-ops, including 140 West End Avenue (1.9%), which was assigned an investment-grade credit opinion. These loans typically exhibit very high coverage and low leverage parameters, as exhibited by the Fitch-stressed DSCR and LTV of 5.65x and 21.1%, respectively.

Loan Concentration: The top 10 loans constitute 35.7% of the pool, which is in line with that of recent Freddie Mac transactions. The top loan in the pool, Milano at Crescent Village, constitutes 7.3% of the pool. The second largest loan is 4.5% of the pool.

Property Type Concentration: Of the pool, 100% is backed by multifamily properties. Four loans (4.2%) are classified as student housing and two loans (3.2%) are classified as assisted/independent living.

Partial Interest and Interest-Only Loans: 57.2% of the pool has a partial-term, interest-only component, and 8.4% of the loans in the pool are full-term, interest-only. Based on the loans' scheduled maturity balances, the pool is expected to amortize 14.3% over the next 10 years.

Strong Origination Practices: All loans were originated by various sellers/originators according to Freddie Mac CME product guidelines and adhere to the originator best practices identified by Fitch. Freddie Mac multifamily loans had an average delinquency rate of 0.09% as of fourth-quarter 2013, compared with 6.48% on Fitch-rated CMBS multifamily loans as of the same period. Based on these program attributes, Fitch applies a programmatic credit to Freddie Mac transactions.

Asset Volatility: Seven loans in the top 10 have asset volatility scores of '4' due to their locations in historically volatile regions as determined by Fitch. Overall, 19 loans in the pool have volatility scores of '4' representing 39.4% of the pool balance. Of note, four loans were assigned asset volatility scores of '4' due to their tenants-in-common ownership

RATING SENSITIVITIES

Fitch performed two model-based break-even analyses to determine the level of cash flow and value deterioration the pool could withstand prior to $1 of loss being experienced by the 'BBB+sf' and 'AAAsf' rated classes. Fitch found that the FREMF 2014-K36 pool could withstand a 54.4% decline in value (based on appraised values at issuance) and an approximately 15.4% decrease to the most recent actual cash flow prior to experiencing a $1 of loss to the 'BBB+sf' rated class. Additionally, Fitch found that the pool could withstand a 58.4% decline in value and an approximately 22.7% decrease in the most recent actual cash flow prior to experiencing $1 of loss to any 'AAAsf' rated class.

Key Rating Drivers and Rating Sensitivities are further described in the accompanying presale report.

The Master Servicer is Wells Fargo, National Association, rated 'CMS1-' by Fitch. The Special Servicer is Keybank National Association rated 'CSS2+', by Fitch.

The presale report is available at 'www.fitchratings.com.'

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Criteria for Analyzing Multiborrower U.S. Commercial Mortgage Transactions'(Aug. 8, 2013);

--'U.S. Commercial Mortgage Servicer Rating Criteria' (Feb. 18, 2011);

--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and ReREMIC Criteria'(Dec. 18, 2012);

--'Global Structured Finance Rating Criteria'(May 24, 2013).

Applicable Criteria and Related Research:

U.S. Commercial Mortgage Servicer Rating Criteria -- Effective Feb. 18, 2011 to Feb. 14, 2014

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=584005

U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=724961

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661

Criteria for Analyzing Multiborrower U.S. Commercial Mortgage Transactions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715757

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=821166

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Contacts

Fitch Ratings
Primary Analyst
Paul Bergagna
Associate Director
+1-212-908-0751
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Derek Shimeck
Analyst
+1-312-368-3192
or
Committee Chairperson
Eric Rothfeld
Managing Director
+1-212-908-0761
or
Media Relations:
Elizabeth Fogerty, New York, +1 212-908-0526
Email: elizabeth.fogerty@fitchratings.com

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Contacts

Fitch Ratings
Primary Analyst
Paul Bergagna
Associate Director
+1-212-908-0751
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Derek Shimeck
Analyst
+1-312-368-3192
or
Committee Chairperson
Eric Rothfeld
Managing Director
+1-212-908-0761
or
Media Relations:
Elizabeth Fogerty, New York, +1 212-908-0526
Email: elizabeth.fogerty@fitchratings.com