KBRA Assigns Preliminary Ratings to VCC 2017-2

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Kroll Bond Rating Agency (KBRA) has assigned preliminary ratings to seven classes of Velocity Commercial Capital 2017-2 (VCC 2017-2) mortgage-backed certificates.

VCC 2017-2 is a $258.5 million securitization collateralized by 877 commercial loans secured by mortgages on 877 small balance residential rental and commercial real estate (CRE) properties. The pool consists adjustable-rate, full recourse loans, all of which fully amortize over their respective terms. The weighted average appraisal LTV and FICO score for the pool are 63.2% and 700, respectively.

The underlying collateral properties are located in 31 states and the District of Columbia, with the three largest state exposures representing 57.5% of the total pool balance: New York (25.3%), California (21.2%), and Florida (11.0%). The residential assets are comprised of 1-4 unit rental properties (558 loans, 52.7% of the aggregate pool balance). The commercial properties are largely comprised of multifamily (85 assets, 26.9% of CRE), mixed use (72 assets, 21.3% of CRE), retail (63 assets, 20.0% of CRE), and office (52 assets, 14.3% of CRE) properties. The remaining commercial properties (47 assets, 17.5% of CRE) include industrial/warehouse (10.4%), auto service centers (6.1%), and manufactured housing community (0.5%) properties. The loans have principal balances that range from $35,170 (0.01%) to $2.3 million (0.9%), with an average of $294,787.

KBRA relied on its RMBS and CMBS methodologies to analyze the transaction based on the nature of the collateral, including its size, and the scope of information available. In doing so KBRA divided the pool into two distinct loan groups to which we applied a residential (sub-pool 1, 558 loans, 52.7% of the total pool balance) and commercial (sub-pool 2, 319 loans, 47.3%) analysis, respectively. KBRA determined losses at each rating category for both the sub-pools assuming a straight sequential payment structure, which were combined to 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, VCC 2017-2 published today 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.

Preliminary Ratings Assigned: VCC 2017-2

Liability Structure
Class  

Initial Class
Balance

  Subordination  

Expected
KBRA Rating

 

Rated Final
Distribution Date

A-FL   (1)   37.000%   AAA (sf)   November 2047
A-FX   (1)   37.000%   AAA (sf)   November 2047
M-1   $30,701,000   25.125%   AA (sf)   November 2047
M-2   $12,280,000   20.375%   A (sf)   November 2047
M-3   $12,926,000   15.375%   BBB (sf)   November 2047
M-4   $12,603,000   10.500%   BB (sf)   November 2047
M-5   $7,110,000   7.750%   B (sf)   November 2047
M-6   $7,109,000   5.000%   NR   N/A
M-7(2)   $12,927,371   0.000%   NR   N/A
XS(2),(3)   $258,528,371(4)   N/A   NR   N/A
       
(1)   The combined certificate principal balance for the Class A-FL and Class A-FX is $162,872,000. The relative sizes of the classes may be increased or decreased, proportionately based on investor demand. In addition, either of the classes may be eliminated and the remaining floating rate or fixed rate class, as applicable, will be issued with the aggregate balance of $162,872,000.
(2) Such class is expected to be retained by the loan seller or an affiliate in satisfaction of the EU risk retention requirements and in satisfaction of the US risk retention requirements.
(3) Such class is expected to be retained by the loan seller or an affiliate in satisfaction of the US risk retention requirement. In addition, the Class P certificates, which have a principal balance of $100 and are entitled only to prepayment premiums and principal distributions in repayment of their principal balance, will also be retained by the loan seller or an affiliate in satisfaction of the US risk retention requirement.
(4) Notional balance equal to the aggregate principal balance of the mortgage loans.
 

Representations & Warranties Disclosure

All Nationally Recognized Statistical Rating Organizations are required, pursuant to SEC Rule 17g-7, to provide a description of a transaction’s representations, warranties and enforcement mechanisms that are available to investors when issuing credit ratings. KBRA’s disclosure for this transaction can be found in the report available here.

Related Publications: (available at www.kbra.com)

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About Kroll Bond Rating Agency

KBRA is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). In addition, KBRA is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP).

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Business Wire: 14:40 GMT Thursday 16th November 2017

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