Velocity Financial, Inc.

We have included in Part I, Item 1A of our 2025 Form 10-K descriptions of certain risks and uncertainties that could affect our business, future performance, or financial condition (the "Risk Factors"). Other than as updated below, there have been no material changes from the disclosures provided in our 2025 Form 10-K. Investors should consider the Risk Factors prior to making an investment decision with respect to our stock.

Risks Related to the Pending Toorak Acquisition and Other Strategic Transactions

The pending Toorak Acquisition is subject to conditions, some of which are outside our control, and may not be completed on the anticipated terms or timeline, or at all.

On August 26, 2026, Velocity Commercial Capital, LLC (“VCC”), our wholly owned subsidiary, entered into an Equity Purchase Agreement with Toorak Capital LLC to acquire the equity interests of certain Toorak entities (the “Toorak Acquisition”). The purchase price is a base amount of approximately $62.0 million subject to certain adjustments. Completion depends on several conditions, including:

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receipt of certain required regulatory approvals;

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completion of certain pre-closing transactions by the seller, including a statutory division of Toorak Capital Partners LLC; and

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the completion, or substantially concurrent completion, of a separate acquisition by affiliates of TOBI III SPE I LLC of certain loan assets and securitization equity interests of the seller (the “Back Book Acquisition”).

We are not a party to the Back Book Acquisition and do not control whether or when it closes. Either party may terminate the Purchase Agreement if the transaction has not closed within 120 days after signing, subject to certain exceptions and extension rights. We cannot assure you that the conditions will be satisfied or waived, that required approvals will be obtained without burdensome conditions, or that the acquisition will close in the fourth quarter of 2026 as we expect.

If the Toorak Acquisition is delayed or not completed, we would not realize its expected benefits. We would also not receive the securitization-related fees contemplated by our Master Transaction Agreement with Titan RR LLC, which depend on completion of both the Toorak Acquisition and the Back Book Acquisition. We would still bear significant costs. Through September 30, 2026, we incurred $7.2 million of acquisition-related costs, and we expect to incur additional costs whether or not the transaction closes.

The pending transaction has also diverted, and will continue to divert, management’s attention from our existing business. A failure to complete the acquisition, or a significant delay, could adversely affect our business, results of operations and the market price of our common stock.

While the transaction is pending, the Toorak business may lose employees, loan sourcing relationships, financing counterparties or other business relationships, and our ability to influence how that business is operated before closing is limited. Any such losses could reduce the value of the business we acquire.

We may not successfully integrate the Toorak business or realize the anticipated benefits of the Toorak Acquisition, and the acquired business may expose us to unanticipated liabilities.

The success of the Toorak Acquisition depends on our ability to integrate the acquired business with ours and to operate it profitably. Integration may be more difficult, costly or time-consuming than we expect. We may be unable to manage the associated credit, operational and regulatory risks effectively.

The value of the acquired business depends substantially on retaining its key personnel and its relationships with originators, correspondents and other loan sourcing partners and financing counterparties. Some of these may terminate or change their relationships as a result of the transaction.

We may also discover liabilities, deficiencies or compliance issues that were not identified in due diligence or that exceed our estimates, such as:

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obligations relating to loans previously originated, acquired or sold;

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repurchase or indemnification obligations;

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licensing or regulatory matters; and

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litigation.

Our indemnification and other contractual protections under the Purchase Agreement are subject to limitations and may not fully cover such liabilities.

In addition, the acquired equity interests will result from a statutory division under Delaware law. Liabilities of the divided entity are allocated among the resulting entities under a plan of division, and creditors or other third parties may challenge that allocation. As a result, we could become subject to liabilities we did not expect to assume.

Before the acquisition, the acquired business was not subject to the internal control over financial reporting requirements that apply to us as a public company. Integrating it into our control environment may require significant resources, and any deficiencies could adversely affect our ability to report our results accurately and on time.

We expect to account for the Toorak Acquisition as a business combination. This requires us to estimate the fair values of acquired assets and assumed liabilities, and those estimates may change during the measurement period. The purchase price is also subject to post-closing adjustments. Any goodwill or intangible assets we record will be subject to future impairment testing, and an impairment charge could adversely affect our results of operations.

If we do not integrate the acquired business successfully, or do not realize the expected growth, synergies or other benefits within the expected timeframe or at all, our business, financial condition and results of operations could be materially and adversely affected.

Funding the Toorak Acquisition will reduce our available liquidity and may increase our leverage.

We expect to fund the purchase price with cash. As of September 30, 2026, we had $86.8 million of unrestricted cash. Our warehouse and repurchase facilities are generally secured by mortgage loans, and their use is subject to eligibility criteria and other terms. Using cash and borrowing capacity for the acquisition will reduce the liquidity available to originate loans, meet margin or other obligations under our financing arrangements, and absorb adverse market developments.

Several of our facilities mature in the near term, including our 2023 Repurchase Agreement, which matures on December 27, 2026. Our ability to renew or replace these facilities on acceptable terms is not assured. The final purchase price may also exceed our current estimates due to other adjustments.

We may pursue other acquisitions or strategic transactions that involve similar risks.

Beyond the Toorak Acquisition, we may from time to time pursue other acquisitions, strategic investments, joint ventures or asset purchases. These transactions involve risks similar to those described above, including:

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difficulties in completing and integrating transactions;

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diversion of management attention;

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loss of key personnel or business relationships;

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assumption of unknown liabilities; and

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the need to use cash, incur debt or issue equity securities, which could dilute our stockholders.

Any such transaction may not produce the benefits we anticipate and could have a material adverse effect on our business, financial condition and results of operations.