DBRS Morningstar Takes Rating Actions on Four Freddie Mac-Issued CMBS Transactions and GAM RE-REMIC TRUST 2022-FRR3

DBRS Limited (DBRS Morningstar) conducted its surveillance review of multiple transactions, which included 18 classes from two Freddie Mac commercial mortgage-backed security (CMBS) transactions (FREMF 2017-K61 Mortgage Trust, Series 2017-K61 and FREMF 2019-K89 Mortgage Trust, Series 2019-K89), 10 classes from two Freddie Mac Structured Pass-Through Certificate transactions (Freddie Mac Structured Pass-Through Certificates, Series K-061 and Freddie Mac Structured Pass-Through Certificates, Series K-089), and 27 classes from one ReREMIC transaction (GAM RE-REMIC TRUST 2022-FRR3). The ReREMIC transaction is collateralized by the above-mentioned two Freddie Mac CMBS transactions, as well as five other Freddie Mac CMBS transactions that are not rated by DBRS Morningstar. DBRS Morningstar upgraded Classes BK27, EK27, and CK71 of the ReREMIC transaction and confirmed the remaining 52 classes across all rated transactions. All trends are Stable.

The full list of ratings on the classes in these transactions can be found at the end of this press release.

The rating confirmations reflect the overall stable performance of the transactions, which have generally remained in line with DBRS Morningstar’s expectations. The rating upgrade for the Class BK27, EK27, and CK71 certificates reflects the increased credit support for the underlying transactions, FREMF 2013-K27 Mortgage Trust, Series 2013-K27 (not rated by DBRS Morningstar) and FREMF 2017-K71 Mortgage Trust, Series 2017-K71 (not rated by DBRS Morningstar), as a result of loan payoffs and/or increased defeasance.

The ReREMIC transaction is a resecuritization collateralized by the beneficial interests in seven commercial mortgage-backed pass-through certificates from seven underlying transactions. Two of these underlying deals are discussed further below. The remaining five underlying deals are not rated by DBRS Morningstar and include FREMF 2013-K27 Mortgage Trust, Series 2013-K27; FREMF 2014-K41 Mortgage Trust, Series 2014-K41; FREMF 2015-K47 Mortgage Trust, Series 2015-K47; FREMF 2017-K71 Mortgage Trust, Series 2017-K71; and FREMF 2017-K728 Mortgage Trust, Series 2017-K728. The ratings are dependent on the performance of the underlying transactions.

The FREMF 2017-K61 transaction is composed of 67 loans (69 loans at issuance). As of the August 2022 remittance, the pool had a current balance of $1.2 billion, reflecting a collateral reduction of 4.7% since issuance. There are no specially serviced or delinquent loans. The pool does benefit from 16 loans, representing 17.3% of the current pool balance, that are fully defeased. Three loans, representing 3.6% of the pool balance, are on the servicer’s watchlist, and all of these loans have been flagged for low debt service coverage ratios (DSCR).

The FREMF 2019-K89 transaction is composed of 60 loans (61 loans at issuance). As of the August 2022 remittance, the pool had a current balance of $1.5 billion, reflecting a nominal collateral reduction of 0.9% since issuance. There are no specially serviced or delinquent loans. The pool does benefit from seven loans, representing 9.0% of the current pool balance that is fully defeased. Five loans, representing 8.8% of the pool balance, are on the servicer’s watchlist, two loans have been flagged for hazard losses, and the remaining four loans are being monitored for low DSCRs.

According to the July 2022 remittance, there are 360 loans secured across the five nonrated Freddie Mac CMBS transactions with an aggregate outstanding balance of $6.5 billion. There are no loans in special servicing and there are eight loans on the servicer’s watchlist, representing 2.9% of the transactions’ aggregate outstanding balance. The watchlisted loans are being monitored for deferred maintenance issues and/or declines in occupancy and net cash flows, resulting in stressed DSCRs. In addition, 154 loans, representing 38.0% of the transactions’ aggregate outstanding balance, have defeased. In evaluating the performance of these transactions, DBRS Morningstar looked for year-over-year changes since the issuance of the ReREMIC, including new defeasance; new additions to, or removals from, the servicers’ watchlists; and loan repayments.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.

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/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

As noted in the press release dated February 3, 2022, for GAM RE-REMIC TRUST 2022-FRR3 (FRR3), a material deviation from the North American CMBS Insight Model was reported for Class EK41, as the assigned rating was lower than the implied results. The material deviation was deemed to be warranted primarily due to uncertain loan level event risks and the concentration of non-DBRS Morningstar rated underlying deals in the transaction, limiting access to the originator for collateral-specific credit-related questions. As performance remained in line with expectations at issuance, DBRS Morningstar did not update the North American CMBS Insight Model run for FRR3 as part of this review.

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 4, 2022), 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.

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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