Fitch Affirms Freddie Mac's Commercial Mortgage Servicer Ratings

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings affirms Freddie Mac's Multifamily Division commercial mortgage servicer ratings as follows:

--Commercial mortgage master servicer at 'CMS2';

--Commercial mortgage special servicer at 'CSS2'.

The master servicer rating reflects Fitch's assessment of Freddie Mac's ability to perform core servicing competencies, including primary servicer oversight, surveillance, loan accounting, and investor reporting. The rating also considers Freddie Mac's lack of experience with other commercial property types and inability to directly service loans, as well as their short tenure as a named master servicer, as well as a lack of an advancing credit committee.

Since becoming a rated master servicer, Freddie Mac experienced significant growth in its master servicing portfolio. In 2015 through self-appointment, Freddie Mac was master servicer for 14 transactions and an additional seven transactions in first quarter 2016. As of March 31, 2016, the company's CMBS master servicing portfolio totaled $6.3 billion comprised of 22 transactions, up from a single transaction totaling $391 million as of year-end 2014. Freddie Mac retains master servicing responsibility for certain K-series single borrower and junior participation loan transactions as well as its small balance securitization program that began in 2015. Small balance transactions represent approximately two-thirds of master servicing assignments by count.

The special servicer rating reflects the group's significant workout experience with multifamily properties throughout the United States, proactive surveillance, efficient use of technology for asset management, and effective internal controls. While only two members of the special servicing team, who average over 30 years of experience, are actively working out defaulted assets, the group has significant special servicing bench strength and management depth among its 22 employees who are capable of working out loans should defaults rise. Special servicing is led by four senior managers averaging 30 years of industry experience and 11 years of tenure.

The special servicing group is responsible for defaults within Freddie Mac's balance sheet portfolio which consists of 6,243 loans totaling $66.6 billion as of March 31, 2016, as well as three CMBS transactions. The special servicing group resolved 19 loans for the 12 months ending March 2016 totaling $266 million, none of which incurred a loss. Resolutions included 15 full payoffs, and four corrected and returned to performing. The multifamily assets were located in 13 states, and the outstanding balance of the loans ranged from approximately $1.4 million to $37.3 million.

Both ratings consider the company's financial strength backstopped by the U.S. Treasury, knowledge of the multifamily lending environment combined with the support of its seller/servicer network. Due to the concentration of servicing for multifamily assets, servicer ratings are limited to the '2' category.

Fitch's servicer rating methodology is described in Fitch's reports 'Rating Criteria for U.S. Commercial Mortgage Servicer', dated Feb. 14, 2014 and 'Rating Criteria for Structured Finance Servicers' dated July 1, 2016, which are available on Fitch's web site www.fitchratings.com.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria

Rating Criteria for Structured Finance Servicers (pub. 01 Jul 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=884140

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

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

Additional Disclosures

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1009018

Endorsement Policy

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

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160715005793/en/

Fitch Ratings
Primary Analyst
Adam Fox
Senior Director
+1-212-908-0869
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Andrew Foster
Director
+1-212-908-0714
or
Committee Chairperson
Christopher Bushart
Senior Director
+1-212-908-0606
or
Media Relations
Sandro Scenga, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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