OREANDA-NEWS. Fitch Ratings has issued a presale report on FREMF 2016-K54 Multifamily Mortgage Pass-Through Certificates and Freddie Mac Structured Pass-Through Certificates Series K-054.

Fitch expects to rate the transaction and assign Rating Outlooks as follows:

FREMF 2016-K54 Multifamily Mortgage Pass-Through Certificates
--$115,529,000 class A-1 'AAAsf'; Outlook Stable;
--$1,037,104,000 class A-2 'AAAsf'; Outlook Stable;
--$1,152,633,000* class X1 'AAAsf'; Outlook Stable;
--$1,152,633,000* class X2-A 'AAAsf'; Outlook Stable;
--$128,071,000 class B 'BBB+sf'; Outlook Stable;
--$35,575,000 class C 'BBB-sf'; Outlook Stable.

Freddie Mac Structured Pass-Through Certificates Series K-054
--$115,529,000 class A-1 'AAAsf'; Outlook Stable;
--$1,037,104,000 class A-2 'AAAsf'; Outlook Stable;
--$1,152,633,000* class X1 'AAAsf'; Outlook Stable.

*Notional amount and interest only.

The expected ratings are based on information provided by the issuer as of April 1, 2016. Fitch does not expect to rate the following classes of FREMF 2016-K54: the $270,371,830 interest-only class X3, the $270,371,830 interest only class X2-B, or the $106,725,830 class D.

Additionally, Fitch does not expect to rate the following class of Freddie Mac Structured Pass-Through Certificates Series K-054: the $270,371,830 interest-only class X3.

The certificates represent the beneficial interests in a pool of 79 commercial mortgages secured by 79 properties. The Freddie Mac Structured Pass-Through Certificates Series K-054 (Freddie Mac SPC K-054) represents a pass-through interest in the corresponding class of securities issued by FREMF 2016-K54. Each Freddie Mac SPC K-054 security has the same designation as its underlying FREMF 2016-K54 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 60.5% of the properties by balance and cash flow analysis of 74.1% of the pool.

The transaction has a Fitch stressed debt service coverage ratio (DSCR) of 1.00x, a Fitch stressed loan-to value (LTV) of 117.9%, and a Fitch debt yield of 7.11%. Fitch's aggregate net cash flow represents a variance of 10.72% to issuer cash flows.

KEY RATING DRIVERS

Fitch Leverage Exceeds 2015 Averages: The pool's Fitch DSCR and LTV are 1.00x and 117.9%, respectively. This represents higher leverage than the Fitch-rated 2015 average DSCR and LTV for 10-year, K-series Freddie Mac deals of 1.08x and 115%, respectively. In addition, 57.9% of the loans in the pool have a Fitch DSCR lower than 1.00x; the average 2015 percentage was 49.7%.

Below-Average Pool Amortization: Within the pool, 16 loans representing 20.78% of the pool are full-term interest only, and 47 loans representing 66.87% of the pool have partial-term
interest-only components. Based on the loans' scheduled maturity balance, the pool is expected to amortize 9.82% during the life of the transaction. This is below recent amortization
levels for Freddie Mac securitizations, which had an average of 10.22% for 2015 Fitch rated 10-year, K-series Freddie Mac deals.

Manufactured Housing and Healthcare Concentration: Twelve loans (7.3% of the pool) and one loan (2.3% of the pool) are classified as Manufactured Housing and Healthcare, respectively. Manufactured Housing and Healthcare are considered more volatile and/or require more operational experience than traditional multifamily assets. The average 2015 Fitch-rated 10-year, K-Series Freddie Mac property concentrations for Manufactured Housing and Healthcare were 5.8% and 1.9%, respectively.

Tenants In Common (TIC) Ownership Structure: Nine loans (11% 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 8.7%.

Diverse Pool by Loan Concentration: The top 10 loans comprise 31.6% of the pool, which is lower than the 2015 average of 33.2% for Fitch-rated 10-year, K-series Freddie Mac deals.
The largest loan in the pool, Florida Crossed Loan Portfolio, represents 4.6% of the pool, while the second largest loan, Tindeco Wharf, represents 3.9% of the pool.

Additional Debt: Five loans representing 5.7% of the pool have subordinate debt. Two loans within the Florida Crossed Loan Portfolio, Wexford (1.4% of the entire pool) and Worthington
(1.2% of the entire pool), have additional debt linked to the Florida State Apartment Incentive Loan (SAIL) while the third loan in the crossed-loan pool (Whispering Woods 0.7% of the entire pool), has additional debt linked to the Florida State Apartment Incentive Extremely Low Income Program (SAIL ELI). Additionally, Wellesley (1.4% of the pool) and Windchase (0.9% of the pool) have additional debt linked to the SAIL ELI program.

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-K54 pool could withstand a 44.2% decline in value (based on appraised values at issuance) and an approximately 19.3% 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 36.2% decline in value and an approximately 7.9% 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 KPMG, 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 79 mortgage loans. Fitch considered this information in its analysis and the findings did not have an impact on our 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.