Velocity Commercial Capital is launching a small-balance commercial mortgage securitization, according to Kroll Bond Rating Agency.

The $223.1 million Velocity Commercial Capital Loan Trust 2017-1 (VCC 2017-1) is backed by 21 mortgages with an average balance of $309,381; the loans are secured by residential rental and commercial real estate properties. Over 54% of the pool’s concentration is in investor-owned, one-to-four family residential properties.

Nine classes of notes will be issued in the latest transaction. Two senior classes sized at $73.44 million apiece carry a preliminary AAA rating from Kroll Bond Rating Agency and are supported by 34.15% subordination.  VCC will retain the $11.7 million subordinate tranche in order to comply with EU risk-retention regulations.

Citigroup Global Markets and Barclays Capital are the initial purchasers.

This is the seventh securitization that includes collateral originated by VCC. The majority (99.2%) were originated in 2016; the remainder have seasoned from 18 months to nine years and were excluded from prior transactions as a result of past delinquencies.

The loans have 30-year original terms, a weighted average interest rate of 8.33% and weighted average FICO of 707. The weighted average loan-to-value ratio of 61.4% compares favorably with collateral backing recent residential and commercial mortgage bonds, according to Kroll. However, the assets underlying those transactions were generally of higher quality than the assets backing VCC 2017-1. "As a result, VCC 2017-1 may exhibit less favorable credit performance than recent RMBS and CMBS securitizations with comparable leverage," the presale report states.

A majority of the loans (514, or 73.6% of the pool) were used to refinance existing debt; the remainder financed acquisitions. Eight of the loans are secured by property that is also encumbered by subordinate debt.

All are serviced by Nationstar Mortgage.

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