FEDERAL HOME LOAN MORTGAGE CORPORATION

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Federal Home Loan Mortgage : Fitch Assigns Final Ratings to FREMF 2021-K132 Multifamily Mtg P-T Ctfs & Freddie Mac SPC Ser K-132

10/15/2021 | 04:36am EDT

Fitch Ratings has assigned the following ratings and Rating Outlooks to FREMF 2021-K132 Multifamily Mortgage Pass-Through Certificates and Freddie Mac Structured Pass-Through Certificates, Series K-132.

RATING ACTIONSENTITY/DEBT	RATING		PRIOR

FREMF 2021-K132

A-1

LT	AAAsf 	New Rating		AAA(EXP)sf

A-1

ULT	AAAsf 	New Rating		AAA(EXP)sf

A-2

LT	AAAsf 	New Rating		AAA(EXP)sf

A-2

ULT	AAAsf 	New Rating		AAA(EXP)sf

A-M

LT	NRsf 	New Rating		NR(EXP)sf

A-M

ULT	NRsf 	New Rating		NR(EXP)sf

D

LT	NRsf 	New Rating		NR(EXP)sf

X1

LT	AAAsf 	New Rating		AAA(EXP)sf

X1

ULT	AAAsf 	New Rating		AAA(EXP)sf

X2-A

LT	AAAsf 	New Rating		AAA(EXP)sf

X2-B

LT	NRsf 	New Rating		NR(EXP)sf

X3

LT	NRsf 	New Rating		NR(EXP)sf

X3

ULT	NRsf 	New Rating		NR(EXP)sf

XAM

LT	NRsf 	New Rating		NR(EXP)sf

XAM

ULT	NRsf 	New Rating		NR(EXP)sf

Freddie Mac 2021-K132

A-1

LT	AAAsf 	New Rating		AAA(EXP)sf

A-1

ULT	AAAsf 	New Rating		AAA(EXP)sf

A-2

LT	AAAsf 	New Rating		AAA(EXP)sf

A-2

ULT	AAAsf 	New Rating		AAA(EXP)sf

A-M

LT	NRsf 	New Rating		NR(EXP)sf

A-M

ULT	NRsf 	New Rating		NR(EXP)sf

X-1

LT	AAAsf 	New Rating		AAA(EXP)sf

X-1

ULT	AAAsf 	New Rating		AAA(EXP)sf

X-3

LT	NRsf 	New Rating		NR(EXP)sf

X-3

ULT	NRsf 	New Rating		NR(EXP)sf

XAM

LT	NRsf 	New Rating		NR(EXP)sf

XAM

ULT	NRsf 	New Rating		NR(EXP)sf

VIEW ADDITIONAL RATING DETAILS

FREMF 2021-K132 Multifamily Mortgage Pass-Through Certificates (FREMF 2021-K132):

$83,000,000b class A-1 'AAAsf'; Outlook Stable;

$896,036,000b class A-2 'AAAsf'; Outlook Stable;

$979,036,000ab class X1 'AAAsf'; Outlook Stable;

$979,036,000a class X2-A 'AAAsf'; Outlook Stable.

In addition, Fitch has issued Unenhanced Ratings, which reflect the underlying creditworthiness absent of the Freddie Mac guarantee as well as Rating Outlooks to FREMF 2021-K132 of 'AAAsf'/Outlook Stable for classes A-1, A-2, and X1. Fitch has not issued Unenhanced Ratings to class X2-A as that class is not guaranteed by Freddie Mac and the 'AAAsf'/Outlook Stable long-term rating already reflects the underlying creditworthiness absent the guarantee.

Freddie Mac Structured Pass-Through Certificates, Series K-132 (Freddie Mac SPC K-132):

$83,000,000b class A-1 'AAAsf'; Outlook Stable;

$896,036,000b class A-2 'AAAsf'; Outlook Stable;

$979,036,000ab class X1 'AAAsf'; Outlook Stable.

Fitch has also issued Unenhanced Ratings, which reflect the underlying creditworthiness absent of the Freddie Mac guarantee as well as Outlooks to Freddie Mac SPC K-132 of 'AAAsf'/Outlook Stable for classes A-1, A-2, and X1.

(a) Notional amount and interest only (IO).

(b) Guaranteed by Freddie Mac.

The FREMF 2021-K132 trust consists of both guaranteed and unguaranteed certificates. The underlying guaranteed certificates consist of the classes A-1, A-2, A-M, X1, XAM and X3. These certificates will be purchased by Freddie Mac to be deposited into the Freddie Mac SPC K-132 trust to back the Freddie Mac SPC K-132 certificates. The ratings of classes A-1, A-2, and X1 consider the Freddie Mac guarantee and the underlying creditworthiness of the collateral. Freddie Mac is currently rated 'AAA'/'F1+'/Outlook Negative.

Fitch does not rate the following classes of FREMF 2021-K132: $230,992,666 IO-class X2-B; $170,491,000 class A-M; $170,491,000 IO-class XAM; $60,501,666 IO-class X3 and $60,501,666 class D. Additionally, Fitch does not rate the following classes of Freddie Mac SPC K-132: $170,491,000 class A-M; $170,491,000 IO-class XAM; $60,501,666 IO-class X3. These ratings and Unenhanced Ratings are based on the information provided by the issuer as of Oct. 14, 2021.

Transaction Summary

The certificates represent the beneficial ownership interest in the trust. The trust's primary assets are 53 loans secured by 53 properties with an aggregate principal balance of approximately $1.15 billion as of the cutoff date. Freddie Mac SPC K-132 represents a pass-through interest in the corresponding class of securities issued by FREMF 2021-K132. Each Freddie Mac SPC K-132 security has the same designation as its underlying FREMF 2021-K132 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 cash flow analysis of 73.5% of the pool and asset summary reviews of 100% of the pool.

KEY RATING DRIVERS

Fitch Leverage Slightly Lower Compared to Recent Transactions: The pool's Fitch debt service coverage ratio (DSCR) and loan to value (LTV) are 1.11x and 130.6%, respectively. The pool's DSCR is above the average for YTD 2021 and 2020 Fitch-rated, 10-year, Freddie Mac transactions of 1.03x and 1.02x, respectively. The pool's LTV is lower than the average LTV for YTD 2021 Fitch-rated, 10-year, Freddie Mac transactions of 135.5% and slightly higher than the 2020 average of 129.4%.

Below-Average Pool Amortization: The pool is scheduled to amortize by 4.2% of the initial pool balance prior to maturity, which is below the Fitch-rated average for YTD 2021 and 2020 Freddie Mac transactions of 7.5% and 8.4%, respectively. Within the pool, 25 loans (61.6%) are full-term IO, and 27 loans (37.7%) are partial IO. The remaining seven loans (0.7%) are amortizing balloon loans.

Traditional Multifamily Exposure: The pool is 95.7% secured by traditional multifamily properties, 2.6% secured by manufactured housing communities (MHCs) and there is one loan accounting for 1.7% of the pool that is secured by a health care property. The pool's traditional multifamily concentration is higher than the YTD 2021 and 2020 Fitch-rated, 10-year Freddie Mac averages of 92.9% and 94.8%, respectively. There are no loans secured exclusively by student housing. Health care properties have a higher probability of default in Fitch's multiborrower model than traditional multifamily property types.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to negative rating action/downgrade:

Declining cash flow decreases property value and capacity to meet its debt service obligations. The list below indicates the model-implied rating sensitivity to changes in one variable, Fitch NCF:

Original Rating: 'AAAsf';

10% NCF decline: 'AA+sf';

20% NCF decline: 'A+sf';

30% NCF decline: 'BBB+sf'.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

Fitch did not consider the implementation of positive stresses for this transaction as the rated classes are at the highest rating level and cannot be upgraded further. The presale report includes a detailed explanation of additional stresses and sensitivities on page 10.

Best/Worst Case Rating Scenario

International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.

USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10

Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as prepared by PricewaterhouseCoopers LLP. The third-party due diligence described in Form 15E focused on a comparison and re-computation of certain characteristics with respect to each of the mortgage loans. Fitch considered this information in its analysis and it did not have an effect on Fitch's analysis or conclusions.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS

A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool is available by clicking the link to the Appendix. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled 'Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions'.

ESG Considerations

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg

Additional information is available on www.fitchratings.com

PARTICIPATION STATUS

The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer's available public disclosure.

APPLICABLE CRITERIA

Criteria for Rating North American Commercial Mortgage Servicers (pub. 22 Jan 2020)

Criteria for Rating Loan Servicers (pub. 08 Feb 2020)

Single- and Multi-Name Credit-Linked Notes Rating Criteria (pub. 12 Feb 2021) (including rating assumption sensitivity)

Global Structured Finance Rating Criteria (pub. 24 Mar 2021) (including rating assumption sensitivity)

North America and Asia-Pacific Multiborrower CMBS Surveillance Criteria (pub. 08 Apr 2021) (including rating assumption sensitivity)

U.S. and Canadian Multiborrower CMBS Rating Criteria (pub. 08 Apr 2021) (including rating assumption sensitivity)

Exposure Draft: Structured Finance and Covered Bonds Counterparty Rating Criteria (pub. 21 Sep 2021)

APPLICABLE MODELS

Numbers in parentheses accompanying applicable model(s) contain hyperlinks to criteria providing description of model(s).

(C) 2021 Electronic News Publishing, source ENP Newswire

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Financials (USD)
Sales 2022 15 427 M - -
Net income 2022 7 763 M - -
Net Debt 2022 - - -
P/E ratio 2022 0,18x
Yield 2022 -
Capitalization 1 353 M 1 353 M -
Capi. / Sales 2022 0,09x
Capi. / Sales 2023 0,09x
Nbr of Employees 7 301
Free-Float 54,6%
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Mean consensus HOLD
Number of Analysts 3
Last Close Price 0,42 $
Average target price 1,00 $
Spread / Average Target 138%
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Managers and Directors
Michael J. DeVito Chief Executive Officer & Director
Michael Thomas Hutchins President
Christian Mark Lown Chief Financial Officer & Executive Vice President
S. Sara Mathew Non-Executive Chairman
Jerry Mauricio Chief Compliance Officer & Senior Vice President