OREANDA-NEWS. Fitch Ratings has affirmed six classes of FREMF 2014-K40 multifamily mortgage pass-through certificates and three classes of Freddie Mac structured pass-through certificates, series K-040. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS
The affirmations are due to the stable portfolio performance since issuance. As of the October 2015 distribution date, the pool's aggregate principal balance has been reduced by 0.4% to $1,558.3 million from $1,565.3 million at issuance. Currently there are no delinquent or defeased loans in the pool. Two loans (1.6% of the pool) are on the servicer watch list, one of which has been identified as Fitch Loan of Concern (0.3%).

The Fitch Loan of Concern is a loan secured by a 109 unit multi-family complex located in Tempe. AZ. The property was built in 1962 and renovated in 2012. As of first quarter (1Q) 2015, the property was 93.6% occupied, compared to 91% at year-end (YE) 2014 and 95% at underwriting. The servicer reported 1Q 2015 Debt Service Coverage Ratio (DSCR) was 0.85 times (x), compared to 1.06 at YE 2014 and 1.35x at underwriting. The loan performance is below underwriting expectations primarily due to an increase in operating expenses and lower rental income as a result of slightly higher vacancy rate.

The largest loan in the pool (5.2%) is secured by Lake Carlton Arms, a 1,912-unit garden-style apartment community located in Lutz, FL within the Tampa-St. Petersburg-Clearwater MSA. It comprises 149 two-story apartment buildings, a two-story clubhouse/leasing office building, three single-story clubhouse buildings, 11 single-story storage buildings and one single-story maintenance building. As of YE 2014, the property was 98% occupied, unchanged since issuance. The servicer reported YE 2014 DSCR was 2.21x, compared to 1.57x at issuance.

The second largest loan in the pool (4.2) is secured by Tanglewood Apartments, an 838-unit garden-style apartment complex located in Arlington Heights, IL, approximately 23 miles northwest of the Chicago CBD. It comprises 21 two-story apartment buildings and three additional buildings containing the management office, maintenance garage and laundry facilitates situated on 38.4 acres of land. As of 1Q 2015, the property was 96% occupied, unchanged since YE 2014, but slightly below the issuance level of 96.8%. The servicer reported 1Q 2015 DSCR was 2.53x, compared to 2.52x at YE 2014 and 1.47x at issuance.

RATING SENSITIVITIES
The Rating Outlooks on all classes remain Stable. 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 'FREMF 2014-K40 Multifamily Mortgage Pass-Through Certificates and Freddie Mac Structured Pass-Through Certificates, Series K-040' (Oct. 27, 2014) new issue report, available at www.fitchratings.com.

Fitch has affirmed the following ratings as indicated:

FREMF 2014-K40 Multifamily Mortgage Pass-Through Certificates
--$218.9 million class A-1 at 'AAAsf'; Outlook Stable;
--$1,104.6 million class A-2 at 'AAAsf'; Outlook Stable;
--Interest Only class X1 at 'AAAsf'; Outlook Stable;
--Interest Only class X2-A at 'AAAsf'; Outlook Stable;
--$78.3 million class B at 'Asf'; Outlook Stable;
--$39.1 million class C at 'BBB+sf'; Outlook Stable.

Freddie Mac Structured Pass-Through Certificates, Series K-040
--$218.9 million class A-1 at 'AAAsf'; Outlook Stable;
--$1,104.6 million class A-2 at 'AAAsf'; Outlook Stable;
--Interest Only class X1 at 'AAAsf'; Outlook Stable.

Of the FREMF 2014-K40 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 2014-K040, Fitch does not rate the interest-only class X3.