Fitch Assigns Final Ratings to FREMF 2015-K50 Multifamily Mtge PT Ctfs & Freddie Mac SPC Ser K-050

CHICAGO--()--Fitch Ratings has assigned the following ratings and Rating Outlooks:

FREMF 2015-K50 Multifamily Mortgage Pass-Through Certificates

--$137,815,000 class A-1 'AAAsf'; Outlook Stable;

--$1,117,300,000 class A-2 'AAAsf'; Outlook Stable;

--$1,255,115,000* class X1 'AAAsf'; Outlook Stable;

--$1,255,115,000* class X2-A 'AAAsf'; Outlook Stable;

--$126,663,000 class B 'BBB+sf'; Outlook Stable;

--$38,383,000 class C 'BBB-sf'; Outlook Stable.

Freddie Mac Structured Pass-Through Certificates Series K-050

--$137,815,000 class A-1 'AAAsf'; Outlook Stable;

--$1,117,300,000 class A-2 'AAAsf'; Outlook Stable;

--$1,255,115,000* class X1 'AAAsf'; Outlook Stable.

*Notional amount and interest only.

Fitch does not rate the following classes of FREMF 2015-K50: $280,194,806 interest-only class X3, $280,194,806 interest only class X2-B, or $115,148,806 class D.

Fitch does not rate the following class of series K-050: $280,194,806 interest-only class X3.

The certificates represent the beneficial interests in a pool of 86 commercial mortgages secured by 86 properties. The Freddie Mac Structured Pass-Through Certificates series K-050 (Freddie Mac SPC K-050) represents a pass-through interest in the corresponding class of securities issued by FREMF 2015-K50. Each Freddie Mac SPC K-050 security has the same designation as its underlying FREMF 2015-K50 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 63.2% of the properties by balance and cash flow analysis of 71.5% 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 116.2%, and a Fitch debt yield of 7.38%. Fitch's aggregate net cash flow represents a variance of 9.6% to issuer cash flows.

KEY RATING DRIVERS

Fitch Leverage Worse than 2015 YTD Averages: The pool's Fitch DSCR and LTV are 1.05x and 116.2%, respectively. This represents worse leverage than for Fitch-rated, 10-year, K-series Freddie Mac deals in 2015 YTD. The 2015 YTD average DSCR and LTV for Fitch rated,10-year, K-series Freddie Mac deals is 1.09x and 115.1%, respectively. In addition, 60% of the loans in the pool have a Fitch DSCR lower than 1.00x; the 2015 YTD percentage is 48%.

Diverse Pool by Loan Concentration: The top 10 loans comprise 31.6% of the pool, which is lower than the 2015 YTD average of 34.3% for Fitch-rated, 10-year, K-series Freddie Mac deals. The largest loan in the pool, Serenade At Riverpark, represents 4.8% of the pool, while the second largest loan, Woodlands Of Columbia, represents 3.5% of the pool.

Below-Average Pool Amortization Compared to YTD 2015 Levels: Within the pool, 22 loans representing 21% of the pool are full-term interest only, and 53 loans representing 70.6% of the pool have partial-term interest-only components. Based on the loans' scheduled maturity balance, the pool is expected to amortize 9.4% during the life of the transaction. This is below recent amortization levels for Freddie Mac securitizations, which had an average of 10.2% for 2015 YTD for Fitch rated, 10-year, K-series Freddie Mac deals.

Credit Opinion Loan: The Doric Cooperative loan, representing 2% of the pool, has credit characteristics consistent with investment-grade obligations. The loan has a stand-alone credit opinion of 'Asf*'.

Low Mortgage Coupons: The pool's weighted average coupon is 4.00%, well below historical averages and slightly above recent 2015 Fitch-rated, 10-year, K-series Freddie Mac deals. 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-K50 pool could withstand a 44.8% decline in value (based on appraised values at issuance) and an approximately 21.2% 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 37.5% decline in value and an approximately 10.9% decrease in the most recent actual cash flow prior to experiencing $1 of loss to the 'BBB-sf' rated class.

DUE DILIGENCE USAGE

Fitch was provided with third-party due diligence information from PricewaterhouseCoopers LLP. The third-party due diligence information was provided on Form ABS Due Diligence-15E and focused on a comparison and re-computation of certain characteristics with respect to each of the 86 mortgage loans. Fitch considered this information in its analysis and the findings did not have an impact on our analysis. A copy of the ABS Due Diligence Form-15E received by Fitch in connection with this transaction may be obtained through the link contained on the bottom of the related rating action commentary.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions (pub. 27 Aug 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=870009

Criteria for Analyzing Multiborrower U.S. and Canadian Commercial Mortgage Transactions (pub. 28 May 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=865499

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

Rating Criteria for Structured Finance Servicers (pub. 23 Apr 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864375

Rating Criteria for U.S. Commercial Mortgage Servicers (pub. 14 Feb 2014)

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

Related Research

FREMF 2015-K50 Multifamily Mortgage Pass-Through Certificates and Freddie Mac Structured Pass-Through Certificates, Series K-050 -- Appendix

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=873400

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=995257

ABS Due Diligence Form 15E 1

https://www.fitchratings.com/creditdesk/press_releases/content/ridf15E_frame.cfm?pr_id=995257&flm_nm=15e_995257_1.pdf

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=995257

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Primary Analyst
Robert Ritter
Analyst
+1-212-908-0328
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Eric Rothfeld
Managing Director
+1-212-908-0761
or
Media Relations:
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Robert Ritter
Analyst
+1-212-908-0328
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Eric Rothfeld
Managing Director
+1-212-908-0761
or
Media Relations:
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com