FEDERAL HOME LOAN MORTGAGE CORPORATION Fitch Ratings has assigned expected ratings and issued a presale report for the FREMF 2023-K153 Mortgage Trust Multifamily Mortgage Pass-Through Certificates and Freddie Mac Structured Pass-Through Certificates, Series K-153.
RATING ACTIONS
Entity / Debt
Rating
A-1
LT
Expected Rating
A-1
ULT
Expected Rating
A-2
LT
Expected Rating
A-2
ULT
Expected Rating
A-M
LT
NR(EXP)sf
Expected Rating
A-M
ULT
NR(EXP)sf
Expected Rating
X1
LT
Expected Rating
X1
ULT
Expected Rating
X3
LT
NR(EXP)sf
Expected Rating
Page
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VIEW ADDITIONAL RATING DETAILS
FREMF 2023-K153 Mortgage Trust Multifamily Mortgage Pass-Through Certificates (FREMF 2023-K153):
Fitch has also assigned expected Unenhanced Ratings, which reflect the underlying creditworthiness absent in the
Freddie Mac Structured Pass-Through Certificates, Series K-153 (
Fitch has also assigned expected Unenhanced Ratings, which reflect the underlying creditworthiness absent the
(a) Notional amount and interest only (IO).
(b) Guaranteed by
The FREMF 2023-K153 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
Fitch does not expect to rate the following classes of FREMF 2023-K153:
These expected ratings and Unenhanced Ratings are based on information provided by the issuer as of
Transaction Summary
The certificates represent the beneficial ownership interest in the trust. The trust's primary assets are 47 fixed-rate loans secured by 37 multifamily properties, six manufactured housing communities and four health care properties with an aggregate principal balance of approximately
Fitch reviewed a comprehensive sample of the transaction's collateral, including cash flow analysis of 86.3% of the pool and asset summary reviews of 100% of the pool.
KEY RATING DRIVERS
Fitch Leverage: The pool's Fitch debt service coverage ratio (DSCR) and loan-to-value (LTV) ratio are 0.94x and 117.8%, respectively. The pool's DSCR is lower than the 2022 and 2021 averages for Fitch-rated 10-year
Pool Concentration: The top 10 loans represent 56.7% of the pool, which is higher than the 2022 and 2021 averages for Fitch-rated 10-year
Property Type Concentration: The pool is 92.0% secured by traditional multifamily properties, 5.5% secured by health care properties, 2.5% secured by MHC (
Freddie Mac Guarantee: The expected ratings of classes A-1, A-2 and X1 factor in added support via a guarantee from
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 net cash flow (NCF):
Original Rating: 'AAAsf';
10% NCF decline: 'AAsf';
20% NCF decline: 'Asf';
30% NCF decline: 'BBBsf'.
Fitch has revised its global economic outlook forecasts as a result of the war in
Fitch expects the North American CMBS sector in the assumed adverse scenario to experience virtually no impact on ratings performance, indicating very few rating or Outlook changes. Fitch expects the asset performance impact of the adverse case scenario to be more modest than the most stressful scenario shown above, which assumes a further 30% decline from Fitch's NCF at issuance.
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
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.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
The expected ratings of classes A-1, A-2 and X1 take into account the
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
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