Velocity Financial is buying Toorak Capital’s operating platform in a deal expected to increase the business-purpose lender’s annual originations by 76% while adding a direct retail channel, a broader investor-loan menu, and more fee-based revenue.
But Velocity is not acquiring Toorak’s approximately $3 billion loan portfolio.
Under a series of related agreements announced Thursday, an unidentified third-party investment firm will purchase that portfolio. Velocity will manage the loans and enter forward agreements to sell future Toorak production to that investor and other counterparties.
That structure gives Velocity the production and asset-management platform without requiring it to place the entire loan portfolio on its own balance sheet.
Velocity will pay approximately $63 million in cash for Toorak’s operating platform, according to a company presentation. A regulatory filing describes the base purchase price as approximately $62 million plus estimated tangible book value, subject to customary adjustments.
The combined platform and portfolio transactions are valued at approximately $3.2 billion based on Toorak’s consolidated balance sheet as of June 30.
Building Scale Without Buying The Loan Book
The acquisition would increase Velocity’s annual origination volume from approximately $2.7 billion to $4.8 billion based on 2025 production, the company said. Its servicing and asset-management platform would grow by 39%, while total assets under management would reach approximately $10 billion in unpaid principal balance.
Velocity currently originates business-purpose loans through a national network of independent mortgage brokers developed over more than two decades. Toorak brings additional sourcing channels and Merchants Mortgage & Trust Corp., its U.S. direct-origination business.
The combined platform will offer debt-service coverage ratio loans, short-term residential transition loans, ground-up construction financing, and loans secured by one- to four-unit rental and small commercial properties.
For brokers working with real estate investors, the transaction puts more products, capital sources, and loan-purchase capacity behind a larger competitor in a segment already attracting significant investment.
DSCR lending has moved well beyond its earlier position as a niche Non-QM product, with wholesalers, mortgage companies, and institutional investors committing more capital to the sector. Industry forecasts project approximately $175 billion in Non-QM originations during 2026, with DSCR and other investor loans expected to represent roughly half of that collateral.
Investor and DSCR loans were also the leading reason brokers recommended Non-QM products in a recent industry survey, while 74.5% of respondents said Non-QM volume was growing within their businesses.
Fee Income Becomes A Bigger Part Of The Model
The economics of the transaction extend beyond additional loan production.
Velocity expects to generate origination, servicing, and asset-management fees through the Toorak platform. The forward loan-sale agreements will provide outlets for future production while allowing the company to operate with less balance-sheet capital than it would need to retain the loans itself.
“This acquisition reflects our commitment to scaling responsibly and deepening our presence in segments where we see durable, long-term demand,” Velocity Co-Founder and CEO Chris Farrar said.
Velocity expects the transaction to add to GAAP earnings beginning in 2027. The company estimates that it will initially dilute book value by approximately 4% to 6%, with that dilution expected to be earned back in roughly three years.
The strategy reflects a wider shift in investor lending: The competitive advantage is increasingly tied not only to offering DSCR or bridge loans, but also to having the capital-markets relationships, technology, and operating infrastructure required to fund and move those loans at scale.
That same pressure is showing up closer to the point of sale. Lenders have been investing in faster DSCR quoting and early deal structuring, while larger platforms are using automation to increase loan capacity without adding the same level of manual operating cost.
Toorak Brands And Management To Remain
Founded in 2016 with backing from funds affiliated with KKR, Toorak has funded more than $20 billion across nearly 43,000 loans in the United States and United Kingdom.
The company has approximately 280 employees, including about 120 at Merchants. Toorak, Merchants, and the companies’ other lending brands will retain their existing names after the transaction closes.
Toorak Founder and CEO John Beacham will continue leading the business and become an executive vice president of Velocity Commercial Capital, Velocity Financial’s operating subsidiary. Toorak will also retain its headquarters in Tampa, Florida.
“When we founded Toorak in 2016, our thesis was that residential real estate investors were underserved by institutional capital,” Beacham said. “Over $20 billion in loans later, that thesis has been proven.”
The transaction is expected to close during the fourth quarter, subject to customary closing conditions and regulatory approvals.
