OREANDA-NEWS. Fitch Ratings has affirmed six classes of Freddie Mac 2014-K39 multifamily mortgage pass-through certificates along with three classes of Freddie Mac structured pass-through certificates, K-039. A detailed list of rating actions follows at the end of this release.

KEY RATING DRIVERS

The affirmations of the Freddie Mac 2014-K39 are based on the stable performance of the underlying collateral pool. The pool's aggregate principal balance has been paid down by 1.3% to $1.31 billion from $1.33 billion at issuance. Based on the year-end 2015 financials provided by the servicer, the pool's overall net operating income (NOI) has been stable with a 6.2% increase over the reported 2014 portfolio NOI. There are two loans (1.1%) on the master servicer's watchlist, one (0.9%) of which is considered a Fitch loan of concern. The 105 loans' final maturity dates are in 2023 (3.7%), 2024 (95.5%), 2028 (0.6%) and 2029 (0.3%). The pool is comprised of 97.4% traditional multifamily properties and 2.6% cooperative housing properties.

Approximately 20.3% of the pool (22 loans) was structured with full-term interest-only (IO) loans. Partial IO loans (34 loans) represent 39.8% of the pool: at the time of Fitch's review, the partial IO period for 14 (12.9%) of these loans had expired. The balances of these loans are now decreasing through principal amortization.

The affirmations of the Freddie Mac K-039 certificates are the result of the pass-through nature of the certificates, as they are dependent on the underlying ratings of corresponding classes for FREMF 2014-K39.

The Fitch loan of concern (0.9%) is secured by The Avalon and Verandah, a 292-unit garden-style apartment divided between two separate communities located one mile west of Texas State University in San Marcos, TX. The properties are adjacent to each other and share a number of general expense items between the communities. Operating performance has trended downward over the past 24 months due to occupancy decreasing to 86% as of March 2016, from 98% at issuance. The loan's IO period ended in June 2015 and the loan's debt service coverage ratio (DSCR) has dropped to 0.91x as of March 2016 compared to 1.52x at issuance. Professional fees and marketing expenses have risen 50% since issuance as the sponsor attempts to raise occupancy in order to increase net operating income. Fitch will continue to monitor as the sponsor works to stabilize the assets during the second half of 2016.

The largest loan in the pool (9.3%) is secured by The Bays Apartment Homes, a 556-unit garden-style apartment community located in Newport Beach, CA. The community amenities for residents include two pools, spa, laundry facilities, clubhouse, and fitness and hiking trails. The sponsor developed the community in three phases between 1974 through 1984. As noted at issuance, the sponsor executed a major capital improvement initiative in the subject to upgrade the individual units by replacing countertops, cabinets, appliances, new flooring, and fixtures over the last two years. Although occupancy dipped to 91% at YE2015 from 96% at YE2014, the property continues to demonstrate stable performance with the YE2015 DSCR at 1.37x versus 1.36x at YE2014, respectively.

The second largest loan (3.1%) is secured by Woodbridge Pines Apartment Homes, a 220-unit garden style apartment complex located in Irvine, CA. The subject is situated on 10.8 acres and consists of 29 two-story buildings, a clubhouse, and laundry facility. The subject is an independently owned and operated property within a larger development named Woodbridge Village. The amenities at the property include a business center, pool/spa, outside barbecue area and a children's playground. YE2015 DSCR increased to 1.43x from 1.28x at issuance as a result of higher rental rates despite a decrease in the subject's occupancy rate to 96% from 98% in 2013.

RATING SENSITIVITIES

All classes maintain Stable Outlooks. Due to the recent issuance of the transaction and stable performance, Fitch does not foresee positive or negative ratings migration 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 report 'FREMF 2014-K39 Multifamily Mortgage Pass-Through Certificates and Freddie Mac Structured Pass-Through Certificates, Series K-039' (Sept. 2, 2014), 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 classes:

FREMF 2014-K39 Multifamily Mortgage Pass-Through Certificates

--$138.9 million class A-1 at 'AAAsf'; Outlook Stable;

--$977.5 million class A-2 at 'AAAsf'; Outlook Stable;

--$63.2 million class B at 'Asf'; Outlook Stable;

--$99.7 million class C at 'BBB+sf'; Outlook Stable;

--$1.116 billion class X1 at 'AAAsf'; Outlook Stable;

--$1.116 billion class X2-A at 'AAAsf'; Outlook Stable.

Fitch does not rate classes D, interest-only class X2-B, and interest-only class X3.

Freddie Mac Structured Pass-Through Certificates, Series K-039

--$138.9 million class A-1 at 'AAAsf'; Outlook Stable;

--$977.5 million class A-2 at 'AAAsf'; Outlook Stable;

--$1.116 billion class X1 at 'AAAsf'; Outlook Stable.

Fitch does not rate interest-only class X3.