Velocity's new investor mortgage seeks to stave off payment shock

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Velocity Mortgage Capital's new mortgage-broker loan for income-producing residential and small-balance commercial properties aims to offer investors more payment certainty than traditional bank financing.

The new loan, which is an addition to the wholesale lender's FlexPerm product line, gives investors the option of taking out 30-year fixed-rate financing with a matching amortization schedule.

While common for owner-occupied single-family residential loans, a 30-year fixed-rate mortgage that amortizes over that period is rarer in the income-producing property markets.

Banks more typically offer 10-year fixed loans with a balloon payment at the end of the term. Other nonbanks in the private money market may offer even shorter-term loans with larger balloon payments.

Velocity also continues to offer a loan with a three-year fixed-rate period that adjusts over the rest of the 30-year loan term.

"The new 30-year option on FlexPerm loans allows borrowers to lock in historically low rates for the life of the loan," Chris Farrar, Velocity's CEO and founder, said in a press release. "We're proud to provide loan products that enable brokers to expand their client base by helping them address the unique needs of independent real estate investors and small business owners who typically don’t qualify for traditional bank loans."

Velocity finances single-family rental or investment properties as well as small-balance commercial and multifamily real estate.

The average return on single-family rental properties was 8.8% in the first quarter, up 10 basis points from the average return for 2018, according to Attom Data Solutions. Investment prospects vary widely by region, ranging between 3% and 29%.

Small-balance commercial lending totaled $225 billion last year, the second consecutive year where there was a slight decline, according to a report from Boxwood Means, a research firm specializing in that market.

The top two lenders in this space were JPMorgan Chase (4.7% market share) and Wells Fargo (2.5%), but the next two lenders, both around the 2% share mark, were nonbanks Arbor Commercial Mortgage and CBRE Capital Markets, Boxwood Means said.

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Commercial mortgages Nonbank Mortgage brokers Wholesale lenders Mortgage rates