Fitch to Rate 2015-K44 Multifamily Mtge PT Ctfs & Freddie Mac SPC, Series K-044; Presale Issued

NEW YORK--()--Link to Fitch Ratings' Report: FREMF 2015-K44 Multifamily Mortgage Pass-Through Certificates and Freddie Mac Structured
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864310

Fitch Ratings has issued a presale report on FREMF 2015-K44 Multifamily Mortgage Pass-Through Certificates and Freddie Mac Structured Pass-Through Certificates series K-044.

Fitch expects to rate the transaction and assign Rating Outlooks as follows:

FREMF 2015-K44 Multifamily Mortgage Pass-Through Certificates

--$142,350,000 class A-1 'AAAsf'; Outlook Stable;

--$1,185,063,000 class A-2 'AAAsf'; Outlook Stable;

--$1,327,413,000* class X1 'AAAsf'; Outlook Stable;

--$1,327,413,000* class X2-A 'AAAsf'; Outlook Stable;

--$140,693,000 class B 'BBB+sf'; Outlook Stable;

--$40,781,000 class C 'BBB-sf'; Outlook Stable.

Freddie Mac Structured Pass-Through Certificates series K-044

--$142,350,000 class A-1 'AAAsf'; Outlook Stable;

--$1,185,063,000 class A-2 'AAAsf'; Outlook Stable;

--$1,327,413,000* class X1 'AAAsf'; Outlook Stable.

*Notional amount and interest only.

The expected ratings are based on information provided by the issuer as of April 2, 2015. Fitch does not expect to rate the following classes of FREMF 2015-K44: the $303,816,679 interest-only class X3, the $303,816,679 interest only class X2-B, or the $122,342,679 class D. Fitch does not expect to rate the $303,816,679 class X3 of the Structured Pass-Through Certificates, Series K-044.

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-044 (Freddie Mac SPC K-044) represents a pass-through interest in the corresponding class of securities issued by FREMF 2015-K44. Each Freddie Mac SPC K-044 security has the same designation as its underlying FREMF 2015-K44 class. All loans were originated specifically for Freddie Mac by approved Seller Servicers. The certificates follow a sequential-pay structure.

Fitch reviewed a comprehensive sample of the transaction's collateral, including site inspections on 68.5% of the properties by balance and cash flow analysis of 79.1% of the pool.

The transaction has a Fitch stressed debt service coverage ratio (DSCR) of 1.05x, a Fitch stressed loan-to value (LTV) of 117.6%, and a Fitch debt yield of 7.22%. Fitch's aggregate net cash flow represents a variance of 8.04% to issuer cash flows.

KEY RATING DRIVERS

Fitch Leverage Exceeds 2014 Averages: The pool's Fitch DSCR and LTV are 1.05x and 117.6%, respectively. This represents higher leverage than for Fitch-rated, 10-year, K-series Freddie Mac deals in 2014. The 2014 average DSCR and LTV for Fitch-rated, 10-year, K-series Freddie Mac deals was 1.16x and 105.6%, respectively.

Above Average Property Quality: Five properties, accounting for 30.3% of the sample received a property quality grade of 'A-' or better, including three of the largest 10 loans. An additional 7% of the sample received a property quality grade of 'B+'.

Loan and Sponsor Concentration: The top 10 loans (including crossed-collateralized groups) comprise 39.4% of the pool, which is greater than the 2014 average of 31.8% for Fitch-rated, 10-year, K-series Freddie Mac deals. The largest two loans, Grand Plaza and the Village of Charleytowne, account for 11.4% of the pool and 4.7% of the pool, respectively. Loan sponsors have a combined 36 loans representing 48.5% of the pool. The largest sponsor concentration is 14.4% of the pool, while five sponsors have concentrations of greater than 4.2%.

Below-Average Pool Amortization: Within the pool, eight loans, representing 21.2% of the pool, are full-term interest only and 53 loans, representing 66.1% of the pool, have partial-term interest-only components. Based on the loans' scheduled maturity balance, the pool is expected to amortize 10.1% during the life of the transaction. This is one of the lowest amortization levels of recent Freddie Mac securitizations, which had an average amortization of 12.1% for 2014 Fitch-rated, 10-year, K-series Freddie Mac deals.

Healthcare and Student-Housing Concentration: Six loans (9.9%) are classified as student housing, six loans (4%) are classified as independent living facilities and three loans (2.2%) are classified as assisted living facilities. These three multifamily sub classifications are considered more volatile and/or require more operational experience than traditional multifamily assets. The concentration of these three multifamily sub classifications in this transaction is higher than in past Freddie Mac transactions.

Low Mortgage Coupons: The pool's weighted average coupon is 3.9%, well below historical averages. Fitch accounted for increased refinance risk in a higher interest rate environment by reviewing an interest rate sensitivity that assumes an interest rate floor of 4.5% for multifamily properties, in conjunction with Fitch's stressed refinance rates, which were 8.6% on a weighted average basis.

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 2015-K44 pool could withstand a 43.85% decline in value (based on appraised values at issuance) and an approximately 16.98% decrease to the most recent actual cash flow prior to experiencing $1 of loss to any 'AAAsf' rated class. Additionally, Fitch found that the pool could withstand a 36.17% decline in value and an approximately 5.63% decrease in the most recent actual cash flow prior to experiencing $1 of loss to the 'BBB-sf' 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' (June 2014);

--'Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions' (March 2015);

--'U.S. Commercial Mortgage Servicer Rating Criteria' (February 2014);

--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (December 2014);

--'Global Structured Finance Rating Criteria' (Aug. 4, 2014).

Applicable Criteria and Related Research:

Criteria for Analyzing Multiborrower U.S. Commercial Mortgage Transactions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748778

Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=862818

Rating Criteria for U.S. Commercial Mortgage Servicers

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=735382

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

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=812608

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864268

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=982519

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Contacts

Fitch Ratings
Primary Analyst
Peter Simon
Director
+1-212-908-9166
Fitch Ratings, Inc.
33 Whitehall Street
New York NY, 10004
or
Secondary Analyst
Donald MacMaster
Analyst
+1-212-908-0379
or
Committee Chairperson
Eric Rothfeld
Managing Director
+1-212-908-0517
or
Media Relations
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Peter Simon
Director
+1-212-908-9166
Fitch Ratings, Inc.
33 Whitehall Street
New York NY, 10004
or
Secondary Analyst
Donald MacMaster
Analyst
+1-212-908-0379
or
Committee Chairperson
Eric Rothfeld
Managing Director
+1-212-908-0517
or
Media Relations
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com