KBRA Assigns Ratings to Velocity Commercial Capital 2024-3 (VCC 2024-3)

KBRA assigns ratings to 12 classes of Velocity Commercial Capital 2024-3 (VCC 2024-3) mortgage-backed certificates.

VCC 2024-3 is a $209.9 million securitization collateralized by 590 small balance commercial loans secured by 654 residential rental or commercial real estate (CRE) properties. The pool is comprised of 576 fixed rate mortgages and 14 floating rate mortgage. The loans have an average outstanding principal balance of $355,686 and range from $48,730 (<0.1%) to $3.4 million (1.6%). The weighted average appraisal loan-to-value (LTV) ratio and FICO score for the pool are 63.1% and 713, respectively.

The underlying properties are located in or near 143 Core Based Statistical Areas (CBSAs) across 39 states plus the District of Columbia. The top-three CBSAs represent 30.6% of the portfolio and include New York-Newark-Jersey City, NY-NJ-PA (13.3%), Los Angeles-Long Beach-Anaheim, CA (10.2%), and Miami-Fort Lauderdale-West Palm Beach, FL (7.1%). The three largest state exposures represent 41.4% of the portfolio and consist of California (19.1%), Florida (11.7%), and Texas (10.6%).

KBRA relied on its RMBS, CMBS, and ABS methodologies to analyze the transaction. In doing so, KBRA divided the pool into three distinct loan groupings, as follows: Sub-pool 1 (354 loans, 45.3% of the total pool balance) is comprised of investor loans secured by residential rental properties with four or less units. Sub-pool 2 (227 loans, 50.7%) consists of small balance commercial real estate assets, and Sub-pool 3 (nine loans, 4.0%) consists of owner-operated commercial real estate assets that were originated under the Small Business Administration’s (SBA) 504 program. Sub-pools 2 and 3 are comprised of mixed-use properties (56 assets, 11.7%), retail properties (46 assets, 9.9%), industrial properties (30 assets, 9.7%), office properties (37 assets, 9.3%), multifamily properties (33 assets, 8.6%), automotive service properties (13 assets, 2.7%), commercial condominium properties (20 assets, 2.6%), and a manufacture housing community (one asset, 0.2%). KBRA reclassified the mixed-use and commercial condominium property types to each asset’s respective core use and classified automotive service properties as retail for our analysis.

The RMBS and CMBS portfolio credit model results were combined with the ABS analysis, on a WA basis, to determine KBRA’s modeled expected losses at each rating category and reflect the quality of the collateral, diligence, and information quality relative to typical RMBS, CMBS, and ABS transactions. The losses were subsequently incorporated into our cash flow modeling, which was used to evaluate the transaction’s credit enhancement levels in the context of its modified pro rata structure.

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Methodologies