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Freddie Mac thins out large-loan concentration in new 'K-Series' pool

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Freddie Mac is sponsoring its next $1.3 billion multifamily loan securitization with a thinner concentration of large loans within the collateral pool compared to recent "K-Series" deal averages.

According to presale reports, the top 10 loans in Freddie’s Series-K114 transaction of structured pass-through certificates (SPCs) make up 38.7% of the pool, which is lower than year-to-date 2020 and 2019 averages for its securitization shelf for commercil multifamily housing loans.

Fitch Ratings and DBRS Morningstar have assigned preliminary AAA ratings to the Class A-1 and A-2 tranches, each benefiting from 18.375% credit enhancement. The Class A-1 notes total $97.2 million, and the Class A-2 notes total $969.2 million.

The pool consists of 59 loans largely secured by older, multifamily mid-rise and garden-star apartment complexes that have undergone recent updates and renovations. Three manufactured housing community loans and one assisted-living facility loan also make up a portion of the FREMF 2020-K114 Series transaction.

The loans have an outstanding balance of $1.3 billion, or about $22.14 million apiece on 10-year terms. The 10-year loans are well seasoned, with weighted-average remaining terms of 118 months. The WA interest rate is 2.96%, with 15 loans – or 30% of the pool by balance – have interest-only payments for the full term.

None of the borrower loans are delinquent or are currently in Freddie Mac’s forbearance program related to COVID-19 related economic stresses. The forbearance plan was expanded in June to allow an additional three months of grace for the loans to developers and operators – so long as to owners agreed to forestall any eviction actions against their delinquent tenants.

The apartments have a WA occupancy of 94.5%.

DBRS Morningstar noted “favorable overall credit metrics” for the latest K-Series transaction.

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CMBS Freddie Mac Multifamily
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