NEW YORK–(BUSINESS WIRE)–Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to 19 classes of Velocity Commercial Capital 2020-1 (VCC 2020-1) mortgage-backed certificates.
VCC 2020-1 is a $261.6 million securitization collateralized by 684 small balance commercial loans secured by 752 residential rental or commercial real estate (CRE) properties. The pool is comprised of 575 fixed rate mortgages (81.7% of the total pool) and 109 adjustable rate mortgages (18.3%). The loans have an average outstanding principal balance of $382,835 which range from $71,163 (0.03%) to $3.2 million (1.2%). The weighted average appraisal loan-to-value ratio (LTV) and FICO score for the pool are 65.5% and 710, respectively.
The underlying properties are located in or near 121 Core Based Statistical Areas (CBSAs) across 38 states and the District of Columbia. The top-three CBSAs represent 44.5% of the portfolio and include New York-Newark-Jersey City, NY-NJ (27.8%), Los Angeles-Long Beach-Anaheim, CA (10.7%), and Miami-Fort Lauderdale-West Palm Beach, FL (5.9%). The three largest state exposures represent 57.1% of the portfolio and consist of New York (23.3%), California (21.7%), and Florida (12.1%).
KBRA relied on its RMBS, CMBS, and Single-Family Rental (SFR) methodologies to analyze the transaction. In doing so, KBRA divided the pool into three distinct loan groupings, as follows: Sub-pool 1 (380 loans, 43.9% of the total pool balance) is comprised of investor loans secured by a single residential rental property with four or less units. Sub-pool 2 (275 loans, 52.1%) is largely comprised of office (67 assets, 22.6% of CRE), mixed use (62 assets, 21.2%), multifamily properties with five or more units (54 assets, 19.9%), retail (46 assets, 19.9%), industrial/warehouse (26 assets, 11.1%), and automotive service (20 assets, 5.3%) properties. The issuer assigned 25 assets (5.3% of CRE) a property type of commercial condominium. However, KBRA reclassified this property type to represent each asset’s respective core use. Sub-pool 3 (29 loans, 4.0%) consists of investor loans secured by portfolios of two or more residential rental properties with four or less units.
The RMBS and aggregated CMBS and SFR 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.
For complete details on the analysis, please see our pre-sale report, Velocity Commercial Capital 2020-1 published at www.kbra.com. The preliminary ratings are based on information known to KBRA at the time of publication. Information received subsequent to this release could result in the assignment of ratings that differ from the preliminary ratings.
To access ratings, reports and disclosures, click here.
Related Publications: (available at www.kbra.com)
- Velocity Commercial Capital 2020-1 Pre-Sale Report
- U.S. RMBS Rating Methodology
- Residential Mortgage Default and Loss Model
- U.S. Single-Family Rental Securitization Methodology
- 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
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KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. 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, and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.
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