OREANDA-NEWS. Fitch Ratings has assigned the following ratings and Rating Outlooks to FREMF 2016-K722 Multifamily Mortgage Pass-Through Certificates and Freddie Mac Structured Pass-Through Certificates Series K-722:

FREMF 2016-K722 Multifamily Mortgage Pass-Through Certificates (FREMF 2016-K722)

--$222,314,000 class A-1 'AAAsf'; Outlook Stable;

--$727,463,000 class A-2 'AAAsf'; Outlook Stable;

--$949,777,000* class X1 'AAAsf'; Outlook Stable;

--$949,777,000* class X2-A 'AAAsf'; Outlook Stable;

--$117,055,000 class B 'BBBsf'; Outlook Stable;

--$29,635,000 class C 'BBB-sf'; Outlook Stable.

Freddie Mac Structured Pass-Through Certificates Series K-722 (Freddie Mac SPC K-722)

--$222,314,000 class A-1 'AAAsf'; Outlook Stable;

--$727,463,000 class A-2 'AAAsf'; Outlook Stable;

--$949,777,000* class X1 'AAAsf'; Outlook Stable.

*Notional amount and interest only.

Fitch did not rate the following classes of FREMF 2016-K722: the $235,592,953 interest-only class X3, the $235,592,953 interest-only class X2-B or the $88,902,953 class D.

Additionally, Fitch did not rate the following class of Freddie Mac SPC K-722: the $235,592,953 interest-only class X3.

The certificates represent the beneficial interests in a pool of 52 commercial mortgages secured by 52 properties. Freddie Mac SPC K-722 represents a pass-through interest in the corresponding class of securities issued by FREMF 2016-K722. Each Freddie Mac SPC K-722 security has the same designation as its underlying FREMF 2016-K722 class. All loans were originated specifically for Freddie Mac by approved Seller Servicers. The certificates follow a sequential-pay structure.

Fitch reviewed a comprehensive sample of the transaction's collateral, including site inspections on 68.7% of the properties by balance and cash flow analysis of 82.3% of the pool.

The transaction has a Fitch stressed debt service coverage ratio (DSCR) of 1.01x, a Fitch stressed loan-to value (LTV) of 117.8%, and a Fitch debt yield of 7.07%. Fitch's aggregate net cash flow represents a variance of 8.45% to issuer cash flows.

KEY RATING DRIVERS

Fitch Leverage Exceeds Historical Averages: The pool's Fitch DSCR and LTV are 1.01x and 117.8%, respectively. This represents higher leverage than the Fitch-rated 2011-2014 average DSCR and LTV for seven-year Freddie Mac transactions of 1.07x and 111.2%, respectively. The leverage for this pool is also slightly higher than the Fitch-rated 2016 YTD average DSCR and LTV for 10-year Freddie Mac transactions of 1.03x and 116.3%, respectively.

Collateral Quality: Fitch performed property inspections on assets representing 68.7% of the pool balance. Six properties, 21.5% of the pool balance, received property quality grades of 'B+' or better; including three properties in the top 10 that received grades of 'A-'. Only one asset (0.6%) received a property quality grade below 'B-'. In addition, five loans (8.6%) are collateralized by newly constructed properties built between 2014 and 2015.

Partial Interest and Interest-Only: Within the pool, seven loans representing 19.8% of the pool are full-term interest-only, and 36 loans representing 68.7% of the pool have partial term interest-only components. Based on the loans' scheduled maturity balance, the pool is expected to amortize 7.4% during the term.

Less Diverse Pool than 2016 YTD and 2015 Freddie Mac Deals: The top 10 loans comprise 43.2% of the pool, which is higher than the 2016 YTD and 2015 averages of 32.6% 33.2%, respectively, for Fitch-rated 10-year, K-series Freddie Mac deals. Additionally, the top-10 loan concentration is higher than the 2011-2014 Fitch-rated seven-year, K-series Freddie Mac deal average of 36.9%. The pool received Loan Concentration Index (LCI) and Sponsor Concentration Index (SCI) scores of 316 and 586, respectively. These scores are higher and indicate greater concentration than 2016 YTD averages for Fitch-rated 10-year, K-series Freddie Mac deals of 204 and 314, respectively.

Tenants In Common (TIC) Ownership Structure: Five loans (16.9% of the pool) have a TIC ownership structure. Recent Fitch-rated 10-year, K-Series Freddie Mac transactions have had a TIC ownership structure ranging from 1.7% to 13.6%.

Low Mortgage Coupons: The pool's weighted average coupon is 4.05%, well below historical averages and slightly above recent 2016 and 2015 Fitch-rated 10-year, K-Series Freddie Mac deals. Fitch accounted for increased refinance risk in a higher interest rate environment by reviewing an interest rate sensitivity that assumes an interest rate floor of 4.5% for multifamily properties, in conjunction with Fitch's stressed refinance rates, which were 9.25% on a weighted average basis.

RATING SENSITIVITIES

Fitch performed two model-based break-even analyses to determine the level of cash flow and value deterioration the pool could withstand prior to $1 of loss being experienced by the 'BBB-sf' and 'AAAsf' rated classes. Fitch found that the FREMF 2016-K722 pool could withstand a 43.4% decline in value (based on appraised values at issuance) and an approximately 19.1% decrease to the most recent actual cash flow prior to experiencing $1 of loss to any 'AAAsf' rated class. Additionally, Fitch found that the pool could withstand a 34.7% decline in value and an approximately 6.7% decrease in the most recent actual cash flow prior to experiencing $1 of loss to the 'BBB-sf'rated class.

DUE DILIGENCE USAGE

Fitch was provided with third-party due diligence information from PricewaterhouseCoopers LLP. The third-party due diligence information was provided on Form ABS Due Diligence-15E and focused on a comparison and re-computation of certain characteristics with respect to each of the 52 mortgage loans. Fitch considered this information in its analysis and the findings did not have an impact on its analysis. A copy of the ABS Due Diligence Form-15E received by Fitch in connection with this transaction may be obtained through the link contained on the bottom of the related rating action commentary.