Velocity Commercial Capital is marketing its second small balance commercial loan securitization of the year.
The deal dubbed Velocity Commercial Capital Loan Trust 2016-2, is backed by 568 loans totaling $190.3 million, according to rating agency reports. The loans have an average principal balance of $334,955, and range from $40,416 (0.02% of the total pool balance) to $3.0 million (1.56%).
Roughly 45% of the loans are secured by one to four family residences; the remainder is backed by commercial buildings, including mixed-use properties, retail properties and multifamily properties. .
In general, small balance commercial assets have historically exhibited higher delinquency rates relative to CMBS. Upon default, smaller balance loans also tend to incur resolution expenses that are a higher percentage of the underlying collateral value than larger assets, which are better able to absorb these costs.
All of the loans in the pool fully amortize over their respective terms.
The pool is largely comprised of loans that were originated in 2015 or after (565 loans, 99.7%), and the remaining 3 loans are seasoned from 21 to 97 months. Proceeds from a majority of the loans (424 loans, 76.5%) were used to refinance existing debt, while the proceeds from remaining loans (23.5%) were used for property acquisitions. There are six loans (1.7%) with subordinate debt in place in the form of second mortgages. The pool has a weighted average (WA) appraisal loan to value (LTV) of 61.2%, and all the loans are full recourse to their respective borrowers, which have a WA FICO score of 707.
KBRA expects to assign ratings ranging from AAA for the senior tranches benefitting from 32.875% subordination to B for a subordinate tranche benefitting from 12.3% subordination. As with Velocity’s previous securitization, the sponsor will retain a $9,513,558 tranche representing the first-loss position in order to comply with European risk retention requirements.
Barclays Capital, Citigroup Global Markets, and Guggenheim Securities are the initial purchasers; Nationstar Mortgage is the servicer and Velocity Commercial Capital is the special servicer.
