KBRA Assigns Preliminary Ratings to Velocity Commercial Capital 2022-3 (VCC 2022-3)
NEW YORK–(BUSINESS WIRE)–KBRA assigns preliminary ratings to 12 categories of Velocity Commercial Capital 2022-3 (VCC 2022-3) mortgage-backed certificates.
VCC 2022-3 is a $315.2 million securitization secured by 682 low balance commercial loans secured by 781 residential rental or commercial real estate (CRE) properties. The pool is made up of 569 fixed rate mortgages (90.9% of the total pool) and 113 adjustable rate mortgages (9.9%). The loans have an average outstanding principal balance of $462,224, which ranges from $27,023 (0.0%) to $3.8 million (1.2%). The valuation weighted average loan-to-value (LTV) ratio and FICO score for the pool are 63.3% and 729, respectively.
The underlying properties are located in or near 127 Central Statistical Areas (CBSAs) in 37 states. The top three CBSAs represent 41.6% of the portfolio and include New York-Newark-Jersey City, NY-NJ (23.9%), Los Angeles-Long Beach-Anaheim, CA (11.4%) and Miami-Fort Lauderdale-West. Palm Beach, Florida (6.3%). The three largest state exposures represent 58.8% of the portfolio and consist of California (25.7%), New York (19.0%) and Florida (14.1%).
KBRA relied on its RMBS and CMBS methodologies to analyze the transaction. In doing so, KBRA divided the pool into two separate loan groups as follows: Sub-pool 1 (384 loans, 43.7% of the total pool balance) consists of loans to investors secured by residential rental properties of four units or less. Sub-pool 2 (298 loans, 56.3%) consists of commercial real estate assets. This sub-pool is largely made up of multi-family buildings (56 assets, 14.2% of the Total), mixed-use buildings (78 assets, 13.3%), businesses with five or more units (63 assets, 13.2%), industrial (25 assets, 5.9%), offices (36 assets, 4.6%), automotive service properties (20 assets, 3.1%) and commercial co-ownership (20 assets, 2.1%). KBRA reclassified mixed-use and commercial property types into condominium based on each asset’s respective primary use, and automotive service properties into retail for our analysis.
The results of the RMBS and CMBS portfolio credit models were combined, on a WA basis, to determine KBRA’s modeled expected losses in each rating category and reflect the quality of collateral, due diligence and quality of information against to typical RMBS and CMBS transactions. The losses were then incorporated into our cash flow modeling, which was used to assess the transaction’s credit enhancement levels in the context of its modified pro rata structure.
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Further information on key credit considerations, sensitivity analyzes that consider factors that may affect these credit ratings and how they could lead to an upgrade or downgrade, and ESG factors (where they are a key factor in changing the credit rating or rating outlook) can be viewed in the full rating report mentioned above.
A description of all substantially significant sources that were used to prepare the credit rating and information on the methodology(ies) (including all significant models and sensitivity analyzes of key relevant rating assumptions, if any) used to determine the credit rating are available. in the information disclosure form(s) located here.
Information on the meaning of each rating category can be found here.
Additional information relating to this rating metric is available in the information disclosure form(s) referenced above. Additional information regarding KBRA’s policies, methodologies, grading scales and disclosures is available at www.kbra.com.
Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the United States Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a rating agency with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a rating agency with the UK Financial Conduct Authority under the temporary registration scheme. In addition, KBRA is designated as the Designated Rating Agency 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.