Freddie Mac : Fitch Assigns Final Ratings to FREMF 2021-K741 Multifamily Mtg P-T Ctfs & Freddie Mac SPC, Ser K-741

Fitch Ratings has assigned the following ratings and Rating Outlooks to FREMF 2021-K741 Multifamily Mortgage Pass-Through Certificates and Freddie Mac Structured Pass-Through Certificates, Series K-741.

RATING ACTIONSENTITY/DEBT	RATING		PRIOR

FREMF 2021-K741

A-1

LT	AAAsf 	New Rating		AAA(EXP)sf

A-1

ULT	AAAsf 	New Rating		AAA(EXP)sf

A-2

LT	AAAsf 	New Rating		AAA(EXP)sf

A-2

ULT	AAAsf 	New Rating		AAA(EXP)sf

A-M

LT	NRsf 	New Rating		NR(EXP)sf

A-M

ULT	NRsf 	New Rating		NR(EXP)sf

D

LT	NRsf 	New Rating		NR(EXP)sf

X1

LT	AAAsf 	New Rating		AAA(EXP)sf

X1

ULT	AAAsf 	New Rating		AAA(EXP)sf

X2-A

LT	AAAsf 	New Rating		AAA(EXP)sf

X2-B

LT	NRsf 	New Rating		NR(EXP)sf

X3

LT	NRsf 	New Rating		NR(EXP)sf

X3

ULT	NRsf 	New Rating		NR(EXP)sf

XAM

LT	NRsf 	New Rating		NR(EXP)sf

XAM

ULT	NRsf 	New Rating		NR(EXP)sf

Freddie Mac 2021-K741

A-1

LT	AAAsf 	New Rating		AAA(EXP)sf

A-1

ULT	AAAsf 	New Rating		AAA(EXP)sf

A-2

LT	AAAsf 	New Rating		AAA(EXP)sf

A-2

ULT	AAAsf 	New Rating		AAA(EXP)sf

A-M

LT	NRsf 	New Rating		NR(EXP)sf

A-M

ULT	NRsf 	New Rating		NR(EXP)sf

X1

LT	AAAsf 	New Rating		AAA(EXP)sf

X1

ULT	AAAsf 	New Rating		AAA(EXP)sf

X3

LT	NRsf 	New Rating		NR(EXP)sf

X3

ULT	NRsf 	New Rating		NR(EXP)sf

XAM

LT	NRsf 	New Rating		NR(EXP)sf

XAM

ULT	NRsf 	New Rating		NR(EXP)sf

VIEW ADDITIONAL RATING DETAILS

FREMF 2021-K741 Multifamily Mortgage Pass-Through Certificates (FREMF 2021-K741):

$26,168,000b class A-1 'AAAsf'; Outlook Stable;

$914,820,000b class A-2 'AAAsf'; Outlook Stable;

$940,988,000ab class X1 'AAAsf'; Outlook Stable;

$940,988,000a class X2-A 'AAAsf'; Outlook Stable.

In addition, Fitch has issued Unenhanced Ratings, which reflect the underlying creditworthiness absent of the Freddie Mac guarantee, as well as Rating Outlooks to FREMF 2021-K741 of 'AAAsf'/Stable for classes A-1, A-2 and X1.

Freddie Mac Structured Pass-Through Certificates, Series K-741 (Freddie Mac SPC K-741)

$26,168,000b class A-1 'AAAsf'; Outlook Stable;

$914,820,000b class A-2 'AAAsf'; Outlook Stable;

$940,988,000ab class X1 'AAAsf'; Outlook Stable.

Fitch has also issued Unenhanced Ratings, which reflect the underlying creditworthiness absent of the Freddie Mac guarantee, as well as Rating Outlooks to FREMF 2021 SPC-K741 of 'AAAsf'/Stable for classes A-1, A-2 and X1.

The FREMF 2021-K741 trust consists of both guaranteed and unguaranteed certificates. The underlying guaranteed certificates consists of the classes A-1, A-2, A-M, X1, XAM and X3. These certificates will be purchased by Freddie Mac to be deposited into the Freddie Mac SPC K-741 trust to back the Freddie Mac SPC Series K-741 certificates. The ratings of classes A-1, A-2, and X1 consider the Freddie Mac Guarantee and the underlying creditworthiness of the collateral. Freddie Mac is rated 'AAA'/'F1+'/Negative.

(a)	Notional amount and interest-only.

(b)	Guaranteed by Freddie Mac.

Fitch does not rate the following classes of FREMF 2021-K741: $107,703,000 class A-M; $107,703,000 interest only-class XAM; $85,029,738 interest-only class X3; $192,732,738 interest-only class X2-B; and $85,029,738 class D. Additionally, Fitch does not rate the following classes of Freddie Mac SPC Series K-741: $107,703,000 class A-M; $107,703,000 interest only-class XAM; $85,029,738 interest-only class X3.

These ratings and Unenhanced Ratings are based on the information provided by the issuer as of March 4, 2021.

TRANSACTION SUMMARY

The certificates represent the beneficial ownership interest in the trust. The trust's primary assets are 33 fixed-rate loans secured by 33 properties with an aggregate principal balance of approximately $1.1 billion as of the cut-off date. Freddie Mac SPC K-741 represents a pass-through interest in the corresponding class of securities issued by FREMF 2021-K741. Each Freddie Mac SPC K-741 security has the same designation as its underlying FREMF 2021-K741 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 cash flow analysis of 94.5% of the pool and asset summary reviews of 100% of the pool.

Coronavirus: The ongoing containment effort related to the coronavirus pandemic may have an adverse impact on near-term revenues (i.e. bad debt expense) and operating expenses (sanitation costs) for some properties in the pool. Delinquencies may occur in the coming months as forbearance programs are put in place, although the ultimate impact on credit losses will depend heavily on the severity and duration of the negative economic impact of the coronavirus pandemic and to what degree fiscal interventions by the U.S. federal government can mitigate the impact on consumers.

As of April 7, 2020, Freddie Mac has put in place a programmatic enhancement to address potential performance issues resulting from the pandemic. Subject to some exceptions, newly originated loans will be structured with debt service reserves. The debt service reserves typically span six months to nine months for loans backed by traditional multifamily properties and 12 months-18 months for loans backed by student or senior housing properties. As described in the loan documents, the reserves will be released once the coronavirus emergency declarations are lifted, full due diligence is confirmed and the property is performing. Freddie Mac will waive this requirement in some instances based on sponsor quality or leverage. For this transaction, 27 loans (88.2% of pool) are structured with debt service reserves. For loans Fitch has identified as having greater risk related to the coronavirus, debt service reserves may be considered an appropriate mitigant and offset added stresses.

KEY RATING DRIVERS

Lower Leverage than Recent Freddie Mac Transactions. The pool's Fitch debt service coverage ratio (DSCR) and loan to value ratio (LTV) are 1.21x and 130.0%, respectively. The pool's Fitch DSCR is higher than the 1.08x 2020 Fitch-rated seven-year average DSCR and the 1.06x YTD 2021 Fitch-rated 10-year average DSCR. The pool's Fitch LTV reflects leverage between the 124.0% average Fitch LTV for 2020 Fitch-rated seven-year transactions and the 134.2% average Fitch LTV for YTD 2021 Fitch-rated 10-year transactions.

Limited Amortization: The pool is scheduled to amortize by 2.5% of the initial pool balance prior to maturity, which is below the 2020 Fitch-rated average for seven-year transactions of 4.8% and below the YTD 2021 Fitch-rated average for 10-year Freddie Mac transactions of 8.1%. Eighteen loans (76.4% of pool) are full term interest-only (IO) loans, 13 loans (21.5% of pool) are partial IO loans, and the remaining two loans (2.0% of pool) provide for amortization through the term of the related underlying mortgage loan. None of the underlying mortgage loans fully amortize over their term.

Non-Traditional Multifamily Exposure: The pool is secured by 94.9% traditional multifamily properties and 5.1% by healthcare properties. The pool's traditional multifamily concentration is below the 2020 Fitch-rated seven-year average of 97.7% but above the YTD 2021 Fitch-rated 10-year Freddie Mac average of 89.8%. Two loans, Palo Alto Commons (4.0%) and The Rutherford Assisted Living and Memory Care (1.1%), are classified as healthcare. Furthermore, two loans in the pool, Moontower (5.8%) and Luxe Belle (1.9%), are secured exclusively by student housing properties. Healthcare properties have a higher probability of default in Fitch's multiborrower model than traditional multifamily property types, and student housing properties are the biggest contributor to overall CMBS multifamily defaults.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to positive rating action/downgrade:

Fitch did not consider the implementation of positive stresses for this transaction as the rated classes are at the highest rating level and cannot be upgraded further. The presale report includes a detailed explanation of additional stresses and sensitivities on page 10 of the report.

Factors that could, individually or collectively, lead to negative rating action/upgrade:

Declining cash flow decreases property value and capacity to meet its debt service obligations. The list below indicates the model implied rating sensitivity to changes in one variable, Fitch NCF:

Original Rating: 'AAAsf'

10% NCF Decline: 'AAsf'

20% NCF Decline: 'A+sf'

30% NCF Decline: 'BBB+sf'

BEST/WORST CASE RATING SCENARIO

International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.

USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10

Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as prepared by Deloitte & Touche LLP. The third-party due diligence described in Form 15E focused on a comparison and recomputation of certain characteristics with respect to each of the mortgage loans. Fitch considered this information in its analysis, and it did not have an effect on Fitch's analysis or conclusions.

DATA ADEQUACY

Fitch received information in accordance with its published criteria, available at www.fitchratings.com. Sufficient data, including asset summaries, three years of property financials, when available, and third-party reports on the properties were received from the issuer. Ongoing performance monitoring including data provided, is described in the Surveillance section of the presale report.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS

A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool is available by clicking the link to the Appendix. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled 'Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions'.

ESG CONSIDERATIONS

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg

Additional information is available on www.fitchratings.com

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