Velocity Financial, Inc. (VEL): Business Model Canvas [Dec-2025 Updated]

You're digging into how Velocity Financial, Inc. actually makes its money in this tricky lending environment, and honestly, their Q3 2025 numbers give us a crystal-clear look under the hood. Forget the generalities; this company is running a sophisticated, vertically integrated machine, originating $739.0 million in business-purpose loans and expertly packaging them for the capital markets while managing a $6.3 billion portfolio. If you want to see exactly how they balance high-yield products-like their new production WAC at 10.48%-with disciplined underwriting and a massive broker network, stick around; this Business Model Canvas breaks down every critical piece.

Velocity Financial, Inc. (VEL) - Canvas Business Model: Key Partnerships

You're looking at how Velocity Financial, Inc. structures its external relationships to fund its loan production and reach its market. These partnerships are critical because Velocity relies heavily on capital markets to finance its assets, which is the core of its business.

The financing side is heavily reliant on relationships with capital providers. Velocity Financial, Inc. completed its first single counterparty securitization in July 2025, totaling $190.9 million of securities issued, which involved a large money manager. This is a key indicator of strong partnership with institutional investors for long-term funding. The company's total available warehouse line capacity, used for short-term financing of new originations before securitization, stood at $600.3 million as of September 30, 2025. Liquidity at that same date was $143.5 million, consisting of $99.0 million in unrestricted cash.

Here's a quick look at the financing and securitization activity involving key partners:

On the origination side, Velocity Financial, Inc. leverages an extensive national network of independent mortgage brokers. This network is how they source the majority of their business purpose loans. The company serves over 2500 independent mortgage brokers across 46 states and Washington, D.C.

The relationship with government programs is managed through its subsidiary:

• Century Health & Housing Capital: Velocity Financial, Inc. holds an 80% ownership interest in this majority-owned subsidiary.
• This subsidiary is a licensed Ginnie Mae (GNMA) issuer/servicer.
• Century provides government-insured Federal Housing Administration (FHA) mortgage financing for specific property types.
• As of late 2021, Century managed a servicing portfolio in excess of $500 million in unpaid principal balance (UPB).

The government-insured product focus from Century Health & Housing Capital acts as a natural hedge through market cycles. This structure allows Velocity Financial, Inc. to participate in government-insured loan programs via its Ginnie Mae issuer status.

Velocity Financial, Inc. (VEL) - Canvas Business Model: Key Activities

You're looking at the core engine of Velocity Financial, Inc. (VEL), the activities that drive the business day-to-day as of late 2025. It's all about disciplined origination, smart balance sheet management, and active asset resolution. This is where the rubber meets the road for their investor loan strategy.

The primary activity is the origination of business purpose loans. For the third quarter of 2025 (3Q25), loan production hit a record, totaling $739.0 million in Unpaid Principal Balance (UPB), which was a 55.0% jump from 3Q24. This volume was supported by strong demand across their core offerings.

Here's a quick look at the key operational metrics from that record quarter:

Managing this growing asset base requires constant attention, which includes portfolio management and servicing. The total loan portfolio stood at just under $6.3 billion in UPB on September 30, 2025. This activity is heavily supported by maintaining strict underwriting standards; the weighted average portfolio loan-to-value (LTV) ratio was a disciplined 65.5% at that same date. It's defintely a key control point.

To optimize the capital structure, Velocity Financial, Inc. actively engages in securitization. In 3Q25 alone, they completed two significant transactions:

• The first single counterparty securitization, totaling $190.9 million of securities issued in July.
• The VCC 2025-4 securitization, totaling $457.5 million of securities issued.

Another critical activity is the resolution of nonperforming assets (NPLs and REOs). In 3Q25, resolutions totaled $108.0 million in UPB, where they realized 102.6% of the UPB resolved, resulting in realized gains of $2.8 million. This shows effective asset management when loans do go sour.

The origination activity covers several types of business purpose loans, which you see reflected in their ongoing servicing needs:

• Traditional commercial loans.
• Investor 1-4 rental loans.
• Government insured multifamily loans (originated by the capital light subsidiary, Century Health & Housing Capital).

Finance: draft 13-week cash view incorporating Q4 pipeline projections by Friday.

Velocity Financial, Inc. (VEL) - Canvas Business Model: Key Resources

You're looking at the core assets that power Velocity Financial, Inc.'s (VEL) operations as of late 2025. These aren't just line items; they are the engines driving the business.

The foundation of the business is its substantial asset base, which provides both earning power and collateral for financing. As of September 30, 2025, the Total loan portfolio was $6.3 billion in Unpaid Principal Balance (UPB). This represents a significant increase, up 32.0% from $4.8 billion as of September 30, 2024.

Maintaining ample liquidity is crucial for a finance company, especially one with aggressive production targets. Velocity Financial, Inc. reported Liquidity of $143.5 million as of the end of the third quarter of 2025. This figure breaks down into specific components that you can deploy quickly:

• $99.0 million in unrestricted cash.
• $44.5 million in available borrowings from unpledged loans.

Also supporting operations is the Total available warehouse line capacity of $600.3 million.

The firm's ability to manage credit risk is a key resource, heavily reliant on its specialized asset management team. This team actively works on resolving problem assets. For the third quarter of 2025, the resolution of Nonperforming Assets (NPL and real estate owned) totaled $108.0 million in UPB. The team's effectiveness is shown by realizing 102.6% of UPB resolved, which resulted in realized gains of $2.8 million for the quarter.

Velocity Financial, Inc. relies on its proprietary systems to manage this scale. While we don't have a specific dollar value for the technology itself, its effectiveness is demonstrated by operational scale and the integration of its subsidiary, Century. Century is a licensed Ginnie Mae (GNMA) issuer/servicer, which is a critical capability for accessing government-insured financing channels, particularly for multifamily housing, senior housing, and long-term care/assisted living facilities. The integration is evident in the production figures, such as the $23.9 million unfunded portion of a construction loan originated by Century included in the record third quarter 2025 loan production.

Here is a snapshot of the key portfolio and operational metrics that these resources support as of September 30, 2025:

The customized operational workflows are also reflected in the successful execution of funding strategies. In 3Q25, Velocity Financial, Inc. completed two securitizations, including its 1st single counterparty securitization totaling $190.9 million of securities issued, alongside the VCC 2025-4 securitization totaling $457.5 million of securities issued.

The weighted average loan-to-value ratio on the portfolio remains disciplined:

• Weighted average portfolio loan-to-value ratio: 65.5% as of September 30, 2025.
• This is below the five-quarter trailing average of 66.2%.

Finance: draft 13-week cash view by Friday.

Velocity Financial, Inc. (VEL) - Canvas Business Model: Value Propositions

Financing for non-traditional real estate investors and small businesses is a core value proposition, focusing on business purpose loans secured by 1-4 unit residential rental and small commercial properties.

High-yield loan products are central to the offering, evidenced by the weighted average coupon (WAC) on Held for Investment (HFI) loan production for the third quarter of 2025 being 10.48%.

The speed and efficiency are delivered via a broker-centric technology platform, serving over 2500 independent mortgage brokers across 46 states. This platform includes a fully-integrated online broker portal.

Access to specialized financing is provided, as seen by the $23.9 million unfunded portion of a construction loan originated by Century included within the record $739.0 million total loan production in 3Q25.

The vertically integrated model simplifies the lending process, supporting a total loan portfolio of just under $6.3 billion in Unpaid Principal Balance (UPB) as of September 30, 2025. This integration is supported by a total available warehouse line capacity of $600.3 million.

Here are key financial metrics supporting the value proposition as of the end of 3Q25:

The value derived from the high-yield product focus is further illustrated by portfolio performance:

• Portfolio Yield: 9.54% for the quarter.
• Cost of Funds: 6.27% for the quarter.
• Portfolio Loan-to-Value Ratio: 65.5% as of September 30th.
• Nonperforming Loans (NPL) as % of HFI Loans: 9.8% as of September 30, 2025.

The technology and broker network scale is significant:

• Number of States Served: 46.
• Total Loans Originated: 1,778 in the third quarter.
• New Applications Received: Exceeded $1.4 billion for the quarter.

Velocity Financial, Inc. (VEL) - Canvas Business Model: Customer Relationships

Dedicated relationship management with the broker network is centered on being the preferred lender. Velocity Financial, Inc. strives to capture incremental volume from its existing network, which, as of a prior report, included approximately 3,137 mortgage brokers with whom the company had done business over the last five years. In the third quarter of 2025, the company funded 1,778 loans sourced through this network. New loan applications exceeded $1.4 billion in the third quarter of 2025, signaling sustained market momentum from this channel.

High-touch, long-term servicing for Century's borrower-direct clients is evidenced by the inclusion of the unfunded portion of a construction loan originated by Century, amounting to $23.9 million, within the third quarter of 2025 record loan production. The total loan portfolio stood at just under $6.3 billion in unpaid principal balance (UPB) as of September 30, 2025, representing a 32.0% increase year-over-year.

Proactive asset management for nonperforming loan resolution shows consistent recovery above par. Nonperforming assets (NPL and real estate owned) resolution totaled $108.0 million in UPB during the third quarter of 2025. This resolution realized 102.6% of UPB resolved, resulting in realized gains of $2.8 million. The nonperforming loan (NPL) ratio as a percentage of Held for Investment (HFI) loans decreased to 9.8% as of September 30, 2025, down from 10.3% as of June 30, 2025.

Transactional engagement for new loan originations resulted in record loan production of $739.0 million in the third quarter of 2025. The weighted average coupon on third quarter 2025 HFI loan production was 10.50%. The total portfolio weighted average loan-to-value ratio was 65.5% as of September 30, 2025.

Key metrics reflecting customer-facing performance and asset quality management for Q3 2025:

Velocity Financial, Inc. (VEL) - Canvas Business Model: Channels

You're looking at how Velocity Financial, Inc. gets its product-business purpose loans-into the hands of borrowers and then monetizes that production. It's a multi-pronged approach, heavy on partnerships but supported by direct origination for specific products.

National network of independent mortgage brokers (primary channel)

This is the core engine for Velocity Financial, Inc.'s origination volume. They have built out a substantial footprint over two decades.

• Serves over 2500 independent mortgage brokers.
• Originations span across 46 states, with activity reported in 45 states & Washington, D.C.

Capital markets for securitization distribution to institutional investors

Moving loans off the balance sheet and into the capital markets is key for funding growth. They use securitization to distribute credit risk to institutional investors.

Here's a look at their recent securitization activity through the first three quarters of 2025:

Historically, they have executed 42 securitizations since 2011, with total gross proceeds from securitization reaching $9 Billion.

Borrower-direct origination channel (Century subsidiary)

The subsidiary, Century Health & Housing Capital, handles government-insured financing, which is a capital-light, fee-based business.

• Century originates loans through its borrower-direct channel.
• For the three months ended September 30, 2025, loan production included an unfunded portion of a construction loan originated by Century of $23.9 million.

Digital tools and technology for broker interface

Velocity Financial, Inc. supports its broker network with technology.

• The company utilizes a proprietary technology platform.
• This includes a fully-integrated online broker portal.

Finance: finalize the Q4 2025 origination breakdown by channel by January 15, 2026.

Velocity Financial, Inc. (VEL) - Canvas Business Model: Customer Segments

You're looking at the core clientele for Velocity Financial, Inc. as of late 2025. The business model is built around originating and managing business purpose loans, primarily for investors who often find traditional bank lending too restrictive or slow.

The primary customer base is clearly segmented by property type, with the Investor 1-4 Rental properties segment remaining the largest component of the Held-for-Investment (HFI) portfolio. As of September 30, 2025, the total loan portfolio stood at $6.3 billion in Unpaid Principal Balance (UPB).

Here is a breakdown of the portfolio composition by property type as of the end of the third quarter of 2025:

The focus on commercial properties is intensifying, which directly feeds the small commercial property investors and business owners segment. For instance, loan production in Q3 2025 saw a 113.7% year-over-year increase in Traditional Commercial loans.

The key customer segments Velocity Financial, Inc. targets include:

• Investors in 1-4 unit residential rental properties: This group represented 51.4% of the total portfolio UPB as of March 31, 2025, and the loan production for Investor 1-4 rental loans grew 37.5% year-over-year in Q3 2025.
• Small commercial property investors and business owners: This is captured by the Traditional Commercial, Retail, Office, and Mixed Use loan categories, which together made up approximately $1.82 billion of the portfolio UPB as of September 30, 2025 (based on the listed categories excluding Investor 1-4 and Multifamily).
• Operators of senior housing and long-term care facilities: While the company acquired Century Health & Housing Capital in December 2021, direct 2025 portfolio data for this specific vertical isn't explicitly broken out in the latest reports, though some 'Government Insured Multifamily (CHHC)' loans were noted in earlier quarters.
• Real estate investors seeking capital outside of bank lending: This describes the entire market served, as Velocity Financial, Inc. operates nationwide through an extensive network of independent mortgage brokers to serve smaller investors in a fragmented market.

The average loan balance across the portfolio as of March 31, 2025, was approximately $395.3 thousand, though the Q2 2025 average was noted closer to $394,000.

Finance: draft the Q4 2025 portfolio breakdown by segment based on the Q3 trends by next Tuesday.

Velocity Financial, Inc. (VEL) - Canvas Business Model: Cost Structure

You're mapping out the financial backbone of Velocity Financial, Inc. as of late 2025. Understanding where the money goes is key to seeing the full picture of their operations.

The cost of funding the loan portfolio is a major outflow. For the third quarter of 2025 (3Q25), Velocity Financial reported a weighted average cost of funds at 6.27%. This figure is important because it directly impacts the net interest margin, which was reported at a strong 3.65% for the portfolio in 3Q25. That spread is what helps cover all the other operational costs.

Compensation and personnel costs scale directly with the business activity. In 3Q25, Compensation expense totaled $23.3 million, up from $17.6 million in 3Q24. This increase reflects both higher headcount, reaching 347 employees at September 30, and the commission component tied to the record production volume. Production itself hit $739 million in 3Q25.

Costs associated with debt financing, specifically interest expense on warehouse lines and securitized debt, are significant. The company completed two securitizations in 3Q25, which resulted in Securitization expense totaling $6.4 million for the quarter, more than double the $3.2 million expense from one securitization in 3Q24. This reflects the strategy to broaden long-term capital access.

General and administrative (G&A) expenses, bundled here with other operating costs, also grew with the business. Total Operating expenses totaled $50.4 million in 3Q25, marking a 45.6% increase from 3Q24. The primary driver here was the aforementioned higher production-driven compensation expenses, alongside increased loan servicing costs.

Credit risk management requires setting aside capital for potential future losses. The Provision for credit losses is reflected in the CECL reserve (Current Expected Credit Losses reserve). As of September 30, 2025, the CECL reserve was $4.6 million. This amount represented 0.22% of the outstanding Held for Investment (HFI) loans at amortized cost, which management noted was consistent with the recent five-quarter average of about 20 basis points.

Here's a quick look at the key cost components for 3Q25:

You can see the cost structure is heavily influenced by two things:

• The cost of the capital used to fund loans, tied to the 6.27% cost of funds.
• The variable costs associated with originating and servicing loans, like the $23.3 million in compensation.

The company is actively managing the credit side, keeping the CECL reserve relatively stable at 22 basis points, even as the loan portfolio grew to just under $6.3 billion in unpaid principal balance.

Finance: draft 13-week cash view by Friday.

Velocity Financial, Inc. (VEL) - Canvas Business Model: Revenue Streams

You're looking at how Velocity Financial, Inc. (VEL) turns its lending activity into actual top-line results as of late 2025. The revenue streams are clearly segmented between the income generated by the loans they keep on the books and the fees generated from loans they originate and sell.

The core of the income engine is the retained loan portfolio. Velocity Financial, Inc. reported a portfolio Net Interest Margin (NIM) of 3.65% for the third quarter of 2025. That's a solid number, showing they are earning well above their cost of funds, which was 6.27% for the portfolio yield of 9.54% in the same period. This 3.65% NIM is up 5 basis points from the 3.60% seen in the third quarter of 2024. This stability is supported by average loan coupons around 10.50% on new production over the last five quarters.

Here's a quick look at the major components making up the total net revenue for 3Q25:

The Other Operating Income line is where you see the direct impact of their high production volume. Velocity Financial, Inc. achieved record loan production of $739.0 million in 3Q25. This fee-based income, which includes loan origination and servicing fees, plus gains from sales, is a critical multiplier for the business model. Honestly, that $37.1 million in other operating income shows how much they are monetizing the origination pipeline.

You also have to account for the income derived from cleaning up the books. Velocity Financial, Inc. continues to see positive results from its asset management efforts. For 3Q25, realized gains from nonperforming asset resolution totaled $2.8 million. This gain was realized on $108.0 million in UPB (Unpaid Principal Balance) resolved, representing 102.6% of the UPB resolved. What this estimate hides is the lumpiness of these resolutions, but the $2.8 million gain is a concrete, positive contribution.

The overall revenue picture is strong, driven by both the retained portfolio yield and the transactional income from new business. You can see the breakdown of the primary drivers below:

• Net Interest Income after provision: $48.7 million.
• Other Operating Income (Origination/Servicing/Sale Fees): $37.1 million.
• Realized Gains from NPA Resolution: $2.8 million.
• Total Net Revenue: $85.8 million for the quarter.

Finance: draft 13-week cash view by Friday.