KBRA Assigns Preliminary Ratings to Velocity Commercial Capital 2025-3 (VCC 2025-3)

KBRA assigns preliminary ratings to 25 classes of Velocity Commercial Capital 2025-3 (VCC 2025-3) mortgage-backed certificates.

VCC 2025-3 is a $392.3 million securitization collateralized by 971 small balance commercial loans secured by mortgages on 1,075 residential rental or commercial real estate (CRE) properties. The pool is comprised of 971 fixed-rate mortgages. The loans have an average outstanding principal balance of $403,986 and range from $21,867 (<0.1%) to $11.0 million (2.8%). The weighted average appraisal loan-to-value (LTV) ratio and FICO score for the pool are 62.2% and 697, respectively.

The underlying properties are located in or near 204 Core Based Statistical Areas (CBSAs) across 43 states plus the District of Columbia. The top-three CBSAs represent 26.3% of the portfolio and include New York-Newark-Jersey City, NY-NJ-PA (10.7%), Los Angeles-Long Beach-Anaheim, CA (9.2%), and Miami-Fort Lauderdale-West Palm Beach, FL (6.5%). The three largest state exposures represent 42.5% of the portfolio and consist of California (20.3%), Florida (13.4%), and New Jersey (8.9%).

KBRA relied on its RMBS and CMBS methodologies to analyze the transaction. In doing so, KBRA divided the pool into two distinct loan groupings, as follows: Sub-pool 1 (630 loans, 45.5% of the total pool balance) is comprised of Investor 1-4 loans. Sub-pool 2 (341 loans, 54.5%) consists of loans secured by commercial real estate assets. This sub-pool is largely comprised of industrial properties (41 assets, 11.9%), Office properties (47 assets, 10.7%), Mixed-Use properties (73 assets, 8.9%), retail properties (74 assets, 8.7%), multifamily properties (52 assets, 6.9%), automotive properties (31 assets, 3.9%), commercial condominium properties (18 assets, 1.6%), a Restaurant/Theater/Lounge (one asset, 1.1%), a car wash (one asset, 0.5%), and day care properties (three assets, 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, 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 and CMBS 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