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FEDERAL HOME LOAN MORTGAGE CORPORATION

(FMCC)
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Federal Home Loan Mortgage : Fitch to Rate FREMF 2021-K129 Multifamily Mtge P-T Ctfs & Freddie Mac SPC Ser K-129; Presale Issued

06/08/2021 | 05:43am EDT

Fitch Ratings has issued a presale report on FREMF 2021-K129 Multifamily Mortgage Pass-Through Certificates and Freddie Mac Structured Pass-Through Certificates, Series K-129.

RATING ACTIONSENTITY/DEBT	RATING		

Freddie Mac 2021-K129

A-1

LT	AAA(EXP)sf 	Expected Rating		

A-1

ULT	AAA(EXP)sf 	Expected Rating		

A-2

LT	AAA(EXP)sf 	Expected Rating		

A-2

ULT	AAA(EXP)sf 	Expected Rating		

A-M

LT	NR(EXP)sf 	Expected Rating		

A-M

ULT	NR(EXP)sf 	Expected Rating		

X1

LT	AAA(EXP)sf 	Expected Rating		

X1

ULT	AAA(EXP)sf 	Expected Rating		

X3

LT	NR(EXP)sf 	Expected Rating		

X3

ULT	NR(EXP)sf 	Expected Rating		

XAM

LT	NR(EXP)sf 	Expected Rating		

XAM

ULT	NR(EXP)sf 	Expected Rating		

FREMF 2021-K129

A-1

LT	AAA(EXP)sf 	Expected Rating		

A-1

ULT	AAA(EXP)sf 	Expected Rating		

A-2

LT	AAA(EXP)sf 	Expected Rating		

A-2

ULT	AAA(EXP)sf 	Expected Rating		

A-M

LT	NR(EXP)sf 	Expected Rating		

A-M

ULT	NR(EXP)sf 	Expected Rating		

D

LT	NR(EXP)sf 	Expected Rating		

X1

LT	AAA(EXP)sf 	Expected Rating		

X1

ULT	AAA(EXP)sf 	Expected Rating		

X2-A

LT	AAA(EXP)sf 	Expected Rating		

X2-B

LT	NR(EXP)sf 	Expected Rating		

X3

LT	NR(EXP)sf 	Expected Rating		

X3

ULT	NR(EXP)sf 	Expected Rating		

XAM

LT	NR(EXP)sf 	Expected Rating		

XAM

ULT	NR(EXP)sf 	Expected Rating		

VIEW ADDITIONAL RATING DETAILS

FREMF 2021-K129 Multifamily Mortgage Pass-Through Certificates (FREMF 2021-K129):

$151,250,000b class A-1 'AAAsf'; Outlook Stable;

$782,874,000b class A-2 'AAAsf'; Outlook Stable;

$934,124,000ab class X1 'AAAsf'; Outlook Stable;

$934,124,000a class X2-A 'AAAsf'; Outlook Stable.

In addition, Fitch has issued expected Unenhanced Ratings, which reflect the underlying creditworthiness absent of the Freddie Mac guarantee as well as Rating Outlooks to FREMF 2021-K129 of 'AAAsf'/ Stable for classes A-1, A-2, and X1. Freddie Mac Structured Pass-Through Certificates, Series K-129 (Freddie Mac SPC K-129):

$151,250,000b class A-1 'AAAsf'; Outlook Stable;

$782,874,000b class A-2 'AAAsf'; Outlook Stable;

$934,124,000ab 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-129 of 'AAAsf'/ Stable for classes A-1, A-2, and X1.

(a)	Notional amount and interest only (IO).
(b)	Guaranteed by Freddie Mac.

The FREMF 2021-K129 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-129 trust to back the Freddie Mac SPC K-129 certificates. The expected 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+'/ Negative.

Fitch does not expect to rate the following classes of FREMF 2021-K129: $208,535,504 IO-class X2-B;

$122,836,000 class A-M; $122,836,000 IO-class XAM; $85,699,504 IO-class X3 and $85,699,504 class D.

Additionally, Fitch does not expect to rate the following classes of Freddie Mac SPC K-129: $122,836,000 class AM; $122,836,000 IO-class XAM and $85,699,504 IO-class X3. These expected ratings and Unenhanced Ratings are based on the information provided by the issuer as of June 7, 2021.

TRANSACTION SUMMARY

The certificates represent the beneficial ownership interest in the trust. The trust's primary assets are 59 loans secured by 59 properties with an aggregate principal balance of approximately $1.14 billion as of the cutoff date. Freddie Mac SPC K-129 represents a pass-through interest in the corresponding class of securities issued by FREMF 2021-K129. Each Freddie Mac SPC K-129 security has the same designation as its underlying FREMF 2021-K129 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 67.3% of the pool and asset summary reviews of 100% of the pool.

Coronavirus: The ongoing containment effort related to the coronavirus pandemic may have an adverse impact on near-term revenues (i.e. bad debt exposure) and operating expenses (sanitation costs) for some properties in the pool. Delinquencies may occur in the coming months as forbearance programs are put in place, although the ultimate impact on credit losses will depend heavily on the severity and duration of the negative economic impact of the coronavirus pandemic and to what degree fiscal interventions by the U.S. federal government can mitigate the impact on consumers.

As of April 7, 2020, Freddie Mac has initiated a programmatic enhancement to address potential performance issues resulting from the pandemic. Subject to some exceptions, newly originated loans will be structured with debt service reserves. The debt service reserves typically span six to nine months for loans backed by traditional multifamily properties. As described in the loan documents, the reserves will be released once the coronavirus emergency declarations are lifted, full due diligence is confirmed and the property is performing.

Freddie Mac will waive this requirement in some instances based on sponsor quality or leverage. For this transaction, 42 loans (or 56.6% of the pool) are structured with debt service reserves. For loans Fitch has identified as having greater risk related to the coronavirus, debt services reserves may be considered an appropriate mitigant to offset added stresses.

KEY RATING DRIVERS

Fitch Leverage Slightly Lower Compared to Recent Transactions: The pool's Fitch debt service coverage ration (DSCR) and loan to value (LTV) ratio are 1.04x and 131.6%, respectively. The pool's DSCR is slightly above the average for YTD 2021 and 2020 Fitch rated 10-year Freddie Mac transactions of 1.02x and 1.02x, respectively. The pool's LTV is lower than the average for YTD 2021 Fitch rated 10-year Freddie Mac transactions of 137.4% and only slightly above the 2020 LTV of 129.4%.

Property Type Concentration: The pool is secured by 92.4% traditional multifamily properties, 4.1% manufactured housing communities (MHCs) and 3.5% health care properties. One loan (3.5% of pool balance) is secured by an independent-living facility. Health care properties have a higher probability of default in Fitch's multiborrower model. There are no student housing properties in the pool. The pool exhibits consistent property concentration as the averages for Fitch-rated YTD 2021, 10-year, Freddie Mac transactions are 92.1% for multifamily, 5.2% for MHCs and 2.7% for health care properties for Fitch-rated transactions.

Below-Average Pool Amortization: The pool is scheduled to amortize by 6.6% of the initial pool balance prior to maturity, which is below the Fitch-rated average for YTD 2021 and 2020 Freddie Mac transactions of 8.1% and 8.4%, respectively. Within the pool, 18 loans (41.7%) are full-term interest only, and 39 loans (55.8%) are partial interest only. The remaining two loans (2.4%) are amortizing balloon loans.

RATING SENSITIVITIES

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.

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 net cash flow (NCF):

Original Rating: 'AAAsf';

10% NCF decline: 'AAsf';

20% NCF decline: 'Asf';

30% NCF decline: 'BBBsf'.

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 Deloitte & Touche 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.

DATA ADEQUACY

Fitch received information in accordance with its published criteria, available at www.fitchratings.com. Sufficient data, including asset summaries, three years of property financials, when available, and third-party reports on the properties were received from the issuer. Ongoing performance monitoring, including the data provided, is described in the Surveillance section of the presale report.

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

(C) 2021 Electronic News Publishing, source ENP Newswire

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Net income 2021 8 813 M - -
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Yield 2021 -
Capitalization 3 608 M 3 608 M -
Capi. / Sales 2021 0,29x
Capi. / Sales 2022 0,24x
Nbr of Employees 6 922
Free-Float 89,6%
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