Fitch Affirms FREMF 2012-K20 & Freddie Mac Structured Pass-Through Certificates Series 2012-K020
OREANDA-NEWS. Fitch Ratings has affirmed six classes of FREMF 2012-K20 multifamily mortgage pass-through certificates and three classes of Freddie Mac structured pass-through certificates, series 2012-K020. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The affirmations reflect the stable performance of the underlying collateral pool. As of the May 2016 distribution date, the pool has no delinquent or specially serviced loans. The pool's aggregate principal balance has been paid down by 3.99% to $1.25 billion from $1.30 billion at issuance. Two loans (2.2% of the pool) have defeased.
There were two variances from criteria related to classes B and C. The surveillance criteria indicated that rating upgrades above the recommended ratings were possible for these two classes. However, Fitch has determined that upgrades are not warranted at this time due to non-material changes since issuance.
Four loans are on the servicer's watch list, including a loan secured by Fairway Lakes (1.9% of the pool), a 340-unit town home and garden-style apartment complex built in 1987. The property is located in Westerville, OH, 10 miles northeast of the Columbus CBD. The servicer was notified of a fire that occurred in April 2015 that destroyed an entire building at the property. The servicer has recently confirmed that all repairs are complete; however, occupancy previously declined to 89% as of year-end (YE) 2015 from 99% at issuance. NOI DSCR was 1.84x as of YE 2015. Fitch will continue to monitor.
One watch list loan has been designated as a Fitch loan of concern (0.3% of the pool). The loan is secured by a 376-unit garden style apartment complex built in 1972 and located in Abilene, TX. As of YE 2015 NOI has decreased 35% since issuance and 24% since YE 2014. Occupancy was 87%, NOI DSCR was 1.18x, and NCF DSCR was 0.80x as of YE 2015. Per the borrower, expenses increased in part due to deferred maintenance work on plumbing, rebranding of the community name, and resident activities to promote resident retention. Fitch will continue to monitor.
RATING SENSITIVITIES
The Stable Outlooks reflect stable pool performance since issuance. The Positive Outlook on Class B indicates the potential for an upgrade in the future. As partial interest-only loan terms expire, the pace of amortization will increase, which should improve credit enhancement if pool performance remains stable. Negative rating actions are not expected until a material economic or asset level event changes the transaction's overall portfolio-level metrics. Additional information on rating sensitivity is available in the 'FREMF 2012-K20 multifamily mortgage pass-through certificates and Freddie Mac structured pass-through certificates, series 2012-K020' (Sept. 4, 2012) presale report, available at www. fitchratings. com.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch has affirmed the following ratings and revised Outlooks as indicated:
FREMF 2012-K20 Multifamily Mortgage Pass-Through Certificates
--$145.9 million class A-1 at 'AAAsf'; Outlook Stable;
--$899.7 million class A-2 at 'AAAsf'; Outlook Stable;
--$1.046 billion* class X1 at 'AAAsf'; Outlook Stable;
--$1.046 billion* class X2-A at 'AAAsf'; Outlook Stable;
--$71.4 million class B at 'A-sf'; Outlook to Positive from Stable;
--$32.5 million class C at 'BBBsf'; Outlook Stable.
Freddie Mac Structured Pass-Through Certificates, Series 2012-K020
--$145.9 million class A-1 at 'AAAsf'; Outlook Stable;
--$899.7 million class A-2 at 'AAAsf'; Outlook Stable;
--$1.046 billion* class X1 at 'AAAsf'; Outlook Stable.
*Notional amount and interest only.
Of the FREMF 2012-K20 multifamily mortgage pass-through certificates, Fitch does not rate the interest-only class X2-B, the interest-only class X3 or class D. In addition, of the Freddie Mac structured pass-through certificates, series 2012-K020, Fitch does not rate interest-only class X3.
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