Freddie Mac is sponsoring its upcoming $1.3 billion multi-family loan securitization with a lower concentration of large loans within the collateral pool compared to recent “K-Series” transaction averages.
According to pre-sale reports, the top 10 loans in Freddie’s Series K114 Structured Transfer Certificate (SPC) deal represent 38.7% of the pool, which is below the 2020 and 2019 cumulative averages for its shelf. securitization for commercial loans for multi-family dwellings.
Fitch Ratings and DBRS Morningstar assigned preliminary ratings of AAA to the A-1 and A-2 class tranches, each benefiting from a credit enhancement of 18.375%. Class A-1 notes total $97.2 million and Class A-2 notes total $969.2 million.
The pool consists of 59 loans largely secured by older mid-rise and garden star multi-family apartment complexes that have recently undergone updates and renovations. Three community loans for manufactured housing and one loan for assisted living facilities are also part of the FREMF 2020-K114 Series transaction.
The loans have an outstanding balance of $1.3 billion, or approximately $22.14 million each over a 10-year term. The 10-year loans are well seasoned, with weighted average remaining terms of 118 months. WA’s interest rate is 2.96%, with 15 loans – or 30% of the pool per balance – with interest-only payments for the full term.
None of the borrowers’ loans are in default or are currently part of Freddie Mac’s forbearance program related to COVID-19 economic stresses. The forbearance plan was expanded in June to give developers and operators three more months of loan grace – as long as landlords agree to prevent any eviction action against their delinquent tenants.
The apartments have a 94.5% WA occupancy.
DBRS Morningstar rated “favorable overall credit metrics” for the latest Series K transaction.