The ITER blanket modules (BM) are geometrically complex with many water coolant channels in a SS316 structure. Detailed mapping of nuclear heating, radiation damage, and helium production is an essential input to the design process. Previous high fidelity, high-resolution results calculated with the CAD based DAG-MCNP code revealed important heterogeneity effects on nuclear heating and helium production near steel/water interfaces. We carried out additional analysis for a simplified geometry to understand the reasons behind the observed peaking in the steel nuclear parameters at the interface with the water coolant. The results show that the peaking in nuclear heating is due to the softer neutron spectrum in the portion of steel adjacent to water which results in more gamma generation. Helium production peaking in steel adjacent to the water is due to the softer neutron spectrum which results in increased helium production primarily in B-10 impurities present in the SS316 in addition to a two-step reaction of low-energy neutrons with Ni.