DBRS Morningstar Confirms Ratings of Impact Funding Affordable Multifamily Housing Mortgage Loan Trust 2014-1

DBRS Limited (DBRS Morningstar) confirmed the ratings of the following classes of Affordable Multifamily Commercial Mortgage Pass-Through Certificates, Series 2014-1 issued by Impact Funding Affordable Multifamily Housing Mortgage Loan Trust 2014-1:

-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-FX1 at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class X-B at B (high) (sf)
-- Class X-FX2 at B (high) (sf)
-- Class F at B (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction, which closed in November 2014 with 124 fixed-rate loans secured by 118 multifamily properties. As of the January 2022 remittance report, there was a collateral reduction of 12.3% since issuance, with 121 loans remaining in the pool. The collateral properties are low-income housing tax credit (LIHTC) developments that are generally lowly levered, as reflected in the weighted-average (WA) debt yield and loan-to-value of 20.3% and 42.9%, respectively, based on the most recent cash flows and January 2022 balances. Based on the January 2022 reporting, the WA debt service coverage ratio (DSCR) for the pool was 2.08 times (x), up from the WA DBRS Morningstar Term DSCR figure derived at issuance of 1.41x.

As of the January 2022 remittance, there are seven loans on the servicer’s watchlist, representing 4.2% of the current pool balance. All of these loans are being monitored for cash flow declines caused by an increase in expenses, with coverage ratios ranging between 0.38x and 1.08x for the Q3 2021 reporting period. None of these loans are reporting any significant decline in occupancy rates. Although these cash flow declines present additional risk for the respective loans within the transaction, there are mitigating factors in the value of the tax credits sold as part of the LIHTC program, which provide significant incentive for the tax credit investors to fund any cash flow shortfalls (as necessary) at the collateral properties to avoid a credit recapture in the event the borrower defaults on the loan.

The largest loan on the watchlist, Brookland Artspace Lofts (Prospectus ID#7, representing 1.1% of the pool balance) is secured by a 41-unit multifamily complex in Washington, D.C. According to the servicer, the loan is being monitored for a low DSCR, driven by expense increases related to utility costs, insurance premiums, and repair and maintenance costs. The loan reported a Q3 2021 DSCR figure of 0.86x compared with the DBRS Morningstar DSCR derived at issuance of 1.27x. Despite the increase in expenses, the loan has historically remained current and has reported an occupancy rate of above 92.0% since 2017.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

Classes X-A, X-B, X-FX1, and X-FX2 are interest-only (IO) certificates that reference a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.

All ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

The DBRS Viewpoint platform provides additional information on this transaction and underlying loans including DBRS Morningstar metrics, commentary, servicer-reported cash flows, and other performance-related data.

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com. The platform includes issuer and servicer data for most outstanding CMBS transactions (including non-DBRS Morningstar rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is North American CMBS Surveillance Methodology (March 26, 2021), which can be found on dbrsmorningstar.com under Methodologies & Criteria. For a list of the structured-finance-related methodologies that may be used during the rating process, please see the DBRS Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.com in the Commentary tab under Regulatory Affairs. Please note that not every related methodology listed under a principal structured finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrsmorningstar.com.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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