NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to 18 classes of Velocity Commercial Capital 2021-3 (VCC 2021-3) mortgage-backed certificates.
VCC 2021-3 is a $204.2 million securitization collateralized by 455 small balance commercial loans secured by 517 residential rental or commercial real estate (CRE) properties. The pool is comprised of 448 fixed rate mortgages (99.1% of the total pool) and seven adjustable rate mortgages (0.9%). The loans have an average outstanding principal balance of $448,803, which range from $44,135 (0.02%) to $5.0 million (2.4%). The weighted average appraisal loan-to-value (LTV) ratio and FICO score for the pool are 68.1% and 721, respectively.
The underlying properties are located in or near 115 Core Based Statistical Areas (CBSAs) across 34 states. The top-three CBSAs represent 39.6% of the portfolio and include New York-Newark-Jersey City, NY-NJ (17.2%), San Francisco-Oakland-Hayward, CA (12.3%), and Los Angeles-Long Beach-Anaheim, CA (10.2%). The three largest state exposures represent 58.3% of the portfolio and consist of California (31.7%), New York (13.6%), and Florida (13.0%).
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 (302 loans, 52.3% of the total pool balance) is comprised of investor loans secured by residential rental properties with four or less units. Sub-pool 2 (153 loans, 47.7%) consists of commercial real estate assets. This sub-pool is largely comprised of industrial/warehouse (21 assets, 25.2% of CRE), multifamily properties with five or more units (29 assets, 23.3%), mixed use (44 assets, 16.2%), retail (23 assets, 15.5%), office (20 assets, 13.4%), and automotive (six assets, 2.5%) properties. The issuer assigned 10 assets (4.0% of CRE) a property type of commercial condominium. However, KBRA reclassified this property type as industrial/warehouse, office, or retail, which represents each asset’s core use.
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.
- U.S. RMBS Rating Methodology
- Residential Mortgage Default and Loss Model
- U.S. CMBS Property Evaluation Methodology
- U.S. CMBS Multi-Borrower Rating Methodology
- Methodology for Rating Interest-Only Certificates in CMBS Transactions
- Global Structured Finance Counterparty Methodology
Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.
A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.
Information on the meaning of each rating category can be located here.
Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority pursuant to the Temporary Registration Regime. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.