Fitch Upgrades Freddie Mac’s Commercial Mortgage Special Servicer Ratings

NEW YORK–(BUSINESS WIRE)–Fitch Ratings takes the following actions on the commercial mortgage
servicer ratings of Freddie Mac’s Multifamily Division:

–Commercial mortgage special servicer rating upgraded to ‘CSS2’ from
‘CSS2-‘;

–Commercial mortgage master servicer rating affirmed at ‘CMS2’.

The upgrade of the special servicer rating reflects the special
servicing group’s 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 19 employees who are capable of working out loans should
defaults rise. Special servicing senior managers average 29 years of
experience and 12 years of tenure, while middle managers average 22
years of experience and seven years with the company.

The special servicing group is responsible for defaults within Freddie
Mac’s balance sheet portfolio which consists of 6,373 loans totaling
$70.3 billion as of March 31, 2015, as well as one CMBS transaction. The
group resolved seven defaulted loans for the 12 months ending March 2015
totaling $42.4 million, only one of which incurred a loss. Resolutions
included three full payoffs, three returned to performing, and one
discounted payoff for multifamily assets located in five states and the
outstanding balance of the loans ranged from approximately $280,000 to
$9.1 million.

The affirmation of the master servicer rating reflects Fitch’s
assessment of Freddie Mac’s core servicing competencies, including
primary servicer oversight, surveillance, loan accounting, and investor
reporting. Since becoming a rated master servicer, Freddie Mac has
appointed itself for the FREMF 2014-KX01, and most recently, FREMF
2015-KJ01 transactions. Future master servicing assignments are expected
to support new product initiatives such as small balance and affordable
housing transactions as well as balance sheet transactions of legacy
assets. In addition to the two CMBS transactions, Freddie Mac performs
the core master servicing, in one form or another, for its $55.6 billion
whole loan portfolio, a multifamily investment securities portfolio of
$23.4 billion, as well as its multifamily guarantee portfolio of $94.7
billion as of March 2015.

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
‘U.S. Commercial Mortgage Servicer Rating Criteria’, dated Feb. 14, 2014
and ‘Rating Criteria for Structured Finance Servicers’ dated April 23,
2015, 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. 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

Additional Disclosures

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=990111

Endorsement Policy

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

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