Board of Directors since June 2021. With over 30 years of relevant businessSkills, Experience and investment experience, Ms. Verner brings to our Board vast knowledge of our industry. Verner is an executive vice president and portfolio manager in the Newport Beach office of Pacific Investment Management Company LLC (PIMCO), focused on asset management globally for PIMCO’s alternative business. She was previously a member of PIMCO’s executive office with responsibility for strategic initiatives, as well as a portfolio manager on the special situations team. Prior to joining PIMCO in 2014, she was a managing director of a startup NPL platform in Europe for Oaktree Capital; chief operating officer of two corporate finance companies, Goldman Sachs Specialty Lending Group and ORIX Finance and director of executive operations for Goldman’s international asset management platform. Ms. Verner has significant experience working on large complex transactions and platform startups in Europe and Asia, as well as in the U.S. Ms. Verner is currently a director of Comcar Industries (a transportation and logistics company, since 2016), First Guaranty Mortgage Corporation (since 2021) and was a director of Flexshopper, Inc. (a lease-toDemographic Information own financial technology company, from 2016 to 2018). She holds a master’s degree in real estate from the University of Denver. She received an undergraduate degree from Texas A&M in agricultural economics.

The Board’s Role and Responsibilities

Risk Oversight

Our Board of Directors has extensive involvement in the oversight of risk management related to us and our business and accomplishes financial risk oversight by delegation to the Audit Committee. The Audit Committee represents the Board of Directors by periodically reviewing our accounting, reporting and financial practices, including the integrity of our financial statements, the surveillance of administrative and financial controls and legal matters that could have a significant impact on our financial statements. Through its meetings with and receipt of reports from management, including the finance, legal and internal audit functions, the Audit Committee reviews and discusses significant areas of our business and summarizes for the Board of Directors financial risks and appropriate mitigating factors.

In addition, our Board of Directors communicates regularly with management on operating performance, strategic reviews, potential transactions, legal and compliance matters, corporate policies and procedures as well as other business matters.

Information Security Risk

Among other things, Management has been tasked by the Board of Directors with identifying and mitigating information security risks.

Management has implemented a security awareness training platform to continually train users on computer safety. Monthly simulated phishing campaigns are used to test and assign training to users. Bi-annual company-wide training is also assigned to ensure all employees are staying current on the latest security threats and how to stay protected.

We have implemented a defense-in-depth strategy to protect all users, network assets and digital information. Perimeter network traffic is controlled by next-generation firewalls that conduct anti-malware, anti-spyware, DNS security, content filtering and threat analysis services on ingress and egress traffic. Endpoints, including servers, workstations, and laptops, run anti-malware agents that monitor for threats in real-time, in addition to scheduled scans of local storage for dormant malicious files. Workstations and laptops run DLP agents that monitor for unsanctioned exfiltration of personal information data. All perimeter and endpoint data are collected in a detection and response platform that correlates the data and alerts the security operations team of potential security breaches. SaaS applications are monitored for malware and personal information data exfiltration using CASB services. E-mails are scanned with protection tools, in additional to other third-party e-mail security tools. The third-party email security service also monitors for personal information data loss. Vulnerability scanning services are utilized to continually scan all network assets for vulnerabilities and sends reports to our security operations teams for remediation.

We recognize that the risks and impacts of cyber based attacks are significant and increasing. Addressing any such incidents quickly and effectively is paramount to the continued operations of our business. We seek to track and investigate all cyber based incidents or incidents that impact our information systems. We adopted an incident response plan that requires us to assess and address such incidents in a timely manner. In the event of an incident, our incident response team and management will focus on minimizing impact while securely and safely restoring disrupted services and systems.

Board Structure

Director Independence

In accordance with our Corporate Governance Guidelines, available on our website, www.velfinance.com, our Board of Directors undertook its annual review of director independence. During this review, our Board considered all transactions and relationships between us and each nominee for director or any member of such person’s immediate family. The purpose of this review is to determine whether any relationship or transaction is considered a “material relationship” that would be inconsistent with a determination that a director is independent. Our Board has not adopted any “categorical standards” for assessing independence.

Our Board affirmatively determined that each of our non-employee director nominees is independent. In making this determination, our Board reviewed the corporate governance rules of the New York Stock Exchange, the exchange where we have listed our common stock. The Board considered commercial, charitable, family and other relationships that directors or members of their immediate family have or have had with us. In addition, for our Audit Committee members, our Board also considered the requirements of Rule 10A-3 under the Exchange Act.

In particular, our Board considered that Messrs. Mantel and Pless were both equity partners of Snow Phipps, one of our largest shareholders, and are managing partners of TruArc Partners, a sub adviser to the Snow Phipps fundfunds that ownsown our shares, and that until August 2018, Ms. Schaefer was an operating partner of Snow Phipps. Our Board also considered that

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Mr.Messrs. Chiao and Ms. VernerMaasarani are officers of Pacific Investment Management Company LLC, another one of our largest shareholders.

Our Board determined that these relationships are not material relationships and therefore do not affect our Board’s determination that these directors are independent.

Board Nominee Rights

In connection with our January 2020 initial public offering, we entered into a stockholders agreement granting rights to nominate up to four individuals to our Board of Directors and in connection with our sale of Series A Preferred Stock, we granted an additional right to nominate an individual to our Board. The following summarizes those rights:

Executive Sessions

Our independent directors and each Board Committee (all comprised of independent directors) have the ability to meet at any time in executive session outside the presence of management. Our Board Chair, our Lead Independent Director Chair or a Committee Chair presides over each executive session, as applicable, and each non-management member of our Board has the authority to call such executive sessions.

Directors and Board Committees

Our Board has standing Audit, Compensation and Governance Committees, each of which has adopted a written charter that is available on our website, www.velfinance.com.

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Board of Directors

Key Responsibilities

Audit Committee

Key Responsibilities

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Compensation Committee

Key Responsibilities

Governance Committee

Key Responsibilities

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Board Practices, Processes and Policies

Corporate Governance Initiatives

We made a commitment to review and improve upon our corporate governance policies. To that end, in early 2022 and continuing through 2023, our Governance Committee and Board implemented multiple corporate governance enhancements to strengthen our Board’s independence, ensure robust risk oversight and bolster alignment, communication and transparency with our shareholders. Below are some of our initiatives:

Incentive Compensation Clawback Policy

The Compensation Committee adopted a policy that allows the Compensation Committee to claw back cash bonuses and equity awards from an executive if the Committee determines that such compensation was overpaid as a result of a restatement of the reported financial results of the Company or any of its segments due to material non-compliance with financial reporting requirements caused or contributed by the executive’s fraud, willful misconduct or gross negligence.

Individual Board Member Performance Evaluations

Our Board adopted a requirement for each Board member to conduct an annual individual self-assessment.

Director and CEO Stock Ownership Guidelines

Our Corporate Governance Guidelines require our CEO and directors (within four years) to acquire ownership positions in our common equity securities equal to (i) for the CEO, five times the CEO’s annual salary and (ii) for each independent Director, four times the annual cash retainer paid to directors. Messrs. Mantel and Pless as director designees of Snow Phipps, our largest shareholder, and Ms. VernerMessrs. Chiao and Mr. Chiao,Maasarani, as officers and director designees of PIMCO, our second largest shareholder, are prohibited by internal policies and procedures from personally holding our shares and are therefore not subject to our director stock ownership requirement. Furthermore, these four directors are not entitled to and do not receive compensation from us for serving on our Board.

Director Retirement Age

Our Corporate Governance Guidelines now requires a director, upon reaching 75 years of age, to tender his or her resignation to the Board with an effective date no later than the next annual shareholder meeting.

Stock Pledging and Anti-Hedging Policy

Our Securities Trading Policy expressly prohibits stock pledging as well as hedging transactions involving our securities. Directors and executive officers are prohibited from purchasing our securities on margin, borrowing against any account in which our securities are held or pledging our securities as collateral for a loan. We prohibit hedging by our directors, executives and employees because we believe that hedging against losses in our securities breaks the alignment between our shareholders and our personnel that equity grants are intended to build. Our anti-hedging policy also prohibits direct and indirect short selling and derivative transactions involving our securities, other than the exercise of any options issued by us to our employees or directors.

Board Leadership and Diversity

We adopted a requirement that the Governance Committee and the Board shall ensure that a female director shall hold at least one Chair of a Committee or be appointed as Board Chair or Lead Independent Director. The Governance Committee recommended, and the Board appointed, Joy Schaefer to the position of Lead Independent Director.

Our Corporate Governance Guidelines also requires that women and underrepresented candidates shall be among every pool of individuals from which new Board nominees are chosen.

Majority / Plurality Vote Standards and Director Resignation Policy

Our Bylaws require a majority vote standard for uncontested elections of directors and a plurality vote standard for contested director elections. Our Board also adopted a policy that Directors are expected to tender an advance resignation. The advance resignation becomes effective for a particular director following an uncontested election of directors where that director nominee did not receive the affirmative vote of a majority of the votes cast and our Board accepts the resignation.

Shareholder Rights

Our certificate of incorporation grants shareholders the right to vote by written consent and to call special meetings.

Related Person Policy and Transactions

Our Board has adopted a written policy for the review and approval of transactions that involve related persons and potential conflicts of interest. Our Related Person Transaction Policy applies to the following Related Persons: each of our directors and executive officers, any security holder who is known to own more than five percent of our shares, any immediate family member of any of the foregoing persons, any entity of which one of our directors is a director or officer and any entity of which one of our directors has a substantial financial interest.

Under our Related Person Transaction Policy, a covered transaction includes a transaction or arrangement involving us and a Related Person that would require disclosure in our filings with the SEC as a transaction with a Related Person.

Related Persons must disclose to the Audit Committee any potential covered transaction and must disclose all material facts with respect to such interest. All covered transactions will be reviewed by the Audit Committee for approval. In determining whether to approve such a transaction, the Audit Committee will consider the relevant facts and circumstances which may include factors such as the relationship of the Related Person with us, the materiality or significance of the transaction to us and the Related Person, the business purpose and reasonableness of the transaction, whether the transaction is comparable to a transaction that could be available to us on an arms-length basis, the impact of the transaction on our business and operations – and ultimately, whether the proposed transaction is or is not in our best interests.

The following transactions have all been approved in accordance with our Related Person Transaction Policy:

In the ordinary course of business, we sell held for sale loans to various financial institutions. From time to time, an affiliate of PIMCO has purchased such loans from us through an arm’s length bidding process. In January 2022, an affiliate of PIMCO purchased held for sale loans from us for approximately $48,987,314. In February 2022, an affiliate of PIMCO purchased held for sale loans from us for approximately $65,825,232. In April 2022, an affiliate of PIMCO purchased held for sale loans from us for approximately $78,214,984. In May 2022, an affiliate of PIMCO purchased held for sale loans from us for approximately $16,741,609.

Tess Meads, an adult child of Mr. Farrar, was employed by us during 20222023 as an account executive. She was compensated in accordance with our typical compensation arrangements for the position she held and for calendar year 2022,2023, she was paid $292,674.$128,640.

NoneOn March 24, 2023, we repurchased 16,355 shares of our vested common stock from our CFO, Mr. Szczepaniak, at a price per share equal to the then closing price of $9.13 per share for total consideration of $149,321, primarily for the executive to raise funds necessary to pay taxes associated with recent stock vestings.

Other than the above, none of our directors or executives participated in any related party transactions with us during 2022.2023.

Executive Compensation Matters

We provide our shareholders with the annual opportunity to vote to approve, on a non-binding, advisory basis, the compensation of our Named Executive Officers as disclosed in this Proxy Statement in accordance with SEC rules. The vote on this resolution is not intended to address any specific element of compensation; rather, the advisory vote relates to the overall compensation of our Named Executive Officers. We value this vote as important feedback from our shareholders.

We believe that there should be a strong link between executive compensation and our performance and the performance of our Named Executive Officers. This Proxy Statement contains a detailed description of the 20222023 compensation of our Named Executive Officers. The Compensation Committee and our Board of Directors believe that our policies and procedures are effective in achieving our goals and that the compensation of our Named Executive Officers will contribute to our long-term success.

Accordingly, we ask our shareholders to vote on the following resolution:

Resolved, that the compensation paid to the Named Executive Officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables and the related narrative disclosure is approved.

Compensation Committee Report

The function of the Compensation Committee is to advise senior management on the administration of our compensation programs and plans, review and approve corporate goals and objectives relevant to CEO compensation, review and approve corporate goals and objectives relevant to the compensation of our other executive officers, evaluate the performance of the executive officers in light of those goals and objectives, set the executive officers’ compensation levels based on this evaluation and assist our CEO in formulating compensation programs applicable to our senior management.

Our Compensation Committee has reviewed and discussed with our management the Compensation Discussion and Analysis section of this Proxy Statement. Based upon the reviews and discussions, we have recommended to our Board of Directors that the Compensation Discussion and Analysis section be included in this Proxy Statement.

Submitted by the Compensation Committee of the Board of Directors

Alan H. Mantel – Chair

Michael W. Chiao

John P. Pitstick

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Compensation Discussion and Analysis

Overview

The Committee’s Role

As a guiding mandate, our goal is to implement an executive compensation plan that reflects our shareholders’ desires and adheres to industry best practices.

Our compensation process is determined by our Compensation Committee, in consultation with our CEO. The Committee considered the views of Mr. Farrar, their assessments of our executives’ individual performance and ranges of peer compensation in approving 20222023 executive compensation.

Role of the Compensation Consultant

The Compensation Committee retained Mercer (US) Inc. as an independent compensation consultant to assist the Compensation Committee with conducting a review of our executive compensation practices, an examination of relevant peer and industry practices and recommendations for 20222023 compensation.

Our Compensation Committee considered whether any conflicts of interest would arise due to its 2022 engagement of Mercer. Mercer previously provided compensation consulting services to us and was paid $21,138approximately $16,034 for services during 20202021, $15,000 for services during 2022 and $16,034$18,431 for services during 2021.2023. The Compensation Committee reviewed and analyzed Mercer’s prior services to and compensation from us and all other factors deemed relevant and required by SEC rules and concluded that the proposed engagement of Mercer by our Compensation Committee for executive compensation work did not raise a conflict of interest and that Mercer remained independent.

Peer Selection

We and our compensation consultant analyzed comparable peer compensation as a general frame of reference for considering the appropriateness of our executive compensation programs and to ensure our executive officers are appropriately aligned with peers.

Our selected peer group also represents companies that have a fair amount in common with our business and, hence, are reasonably comparable for purposes of relative performance:

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Our Compensation Committee conducted an analysis of comparable peer compensation as a general frame of reference for considering the appropriateness of our executive compensation programs and to ensure our CEO and other executive officers’ compensation is aligned with peers.

Our list of peers stayed the samechanged slightly from our 20212022 peer group. iStar Inc., Impac Mortgage Holdings, Broadmark Reality, Marlin Business Services and Blucora were removed from our 2023 peers because they were no longer independently publicly traded companies. At Mercer’s recommendation, BrightSpire Capital, Inc., Granite Point Mortgage Trust Inc. and New York Mortgage Trust, Inc. were added to our 2023 peer group. The following 1513 companies were used as compensation peers for our 20222023 compensation programs:

The Compensation Committee believes the peer group provided an appropriate benchmark given the size and scope of our firm. Target compensation should be sufficiently competitive with industry peers to attract and retain executives with similar levels of experience, skills and responsibilities. Peer group data serves as an important and informative reference point in evaluating our executive compensation. Our Compensation Committee compared the components of our 20222023 compensation program as well as total compensation to the peer group data and determined that our 20222023 compensation program was appropriate and competitive.

The below analysis provides an overview of our executive compensation philosophy, the overall objectives of our executive compensation program and each material element of compensation for the fiscal year ended December 31, 20222023 that we provided to each person who served as our principal executive officer and our other two most highly compensation executive officers during 2022,2023, all of whom we refer to collectively as our Named Executive Officers.

Our 20222023 Named Executive Officers

Our Named Executive Officers for the fiscal year ended December 31, 20222023 were as follows:

Executive Compensation Objectives and Philosophy

The goal of our executive compensation program is to create long-term value for our investors while at the same time reward our executives for superior financial and operating performance and encourage them to remain with us for long, productive careers. We believe the most effective way to achieve this objective is to design an executive compensation program rewarding the achievement of each executive and aligning executives’ interests with those of our investors by using equity as a component of compensation. The following are the core elements of our executive compensation program:

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By incorporating these elements, we believe our executive compensation program is responsive to our investors’ objectives and effective in attracting, motivating and retaining the level of talent necessary to grow and manage our business successfully.

Process for Determining Compensation

Following the end of the year, our Compensation Committee reviews our CEO’s performance and our performance and meets (with and without the CEO) to conduct these evaluations. While our Compensation Committee tries to ensure that a substantial portion of the CEO’s compensation is directly linked to his performance and the performance of our business, our Compensation Committee also seeks to set his compensation in a manner that is competitive with compensation for similarly performing executive officers with similar responsibilities in companies we consider our peers.

In determining the compensation of each of our other executive officers, our Compensation Committee seeks the input of the CEO. At the end of each year, the CEO assesses our executive officers’ performance against the business unit (or area of responsibility), individual goals and objectives and total compensation available to similarly situated executives at our peers. Our Compensation Committee and the CEO then review the CEO’s assessments and discuss and approve the compensation for each executive officer.

Considerations in Setting 20222023 Compensation

Our Compensation Committee believes that the total 20222023 compensation for our executive officers was competitive while at the same time being responsible to our investors.

The following is a summary of key considerations that affected the development of 20222023 compensation decisions for our executive officers:

We expect that going forward, the Compensation Committee will adhere to the compensation philosophy described above. In addition, we anticipate that the Compensation Committee will continue to retain an independent compensation consultant from time to time.

Elements of 20222023 Compensation Program

There are four key components of our executive compensation program for our Named Executive Officers:

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We believe that offering each of the components of our executive compensation program is necessary to remain competitive in attracting and retaining talented executives. Base salaries and cash bonuses are designed to reward executives for their performance and our performance. Furthermore, the cash incentive bonus and long-term equity incentive compensation align the executive’s goals with our goals and those of our shareholders. The components of incentive compensation (the cash bonus and equity awards) are significantly “at risk,” as the cash bonuses and the value of the equity awards depend on our business successes and our stock price.successes. Collectively, these components are designed to reward and influence an executive’s individual performance and our short-term and long-term performance.

Base Salary

We pay our Named Executive Officers base salaries to compensate them for services rendered each year at a pre-established amount. The following table summarizes the annual base salaries for the year ended December 31, 20222023 of our Named Executive Officers:

Performance-Based Cash Incentive Bonus

In addition to receiving base salaries, our Named Executive Officers are eligible to receive cash incentive bonuses. Cash bonuses are designed to incentivize our Named Executive Officers at a variable level of compensation that is “at risk,” based on our performance and the performance of each executive.

In February 2022,January 2023, our Compensation Committee approved fiscal year 20222023 target bonuses for our Named Executive Officers and adopted the Velocity Financial FY 20222023 Annual Cash Incentive Program which provided that cash bonus amounts for the Named Executive officers would be formulaically based 50% on our 20222023 core net income annual growth and 50% on individual and corporate performance objectives. Under the incentive program, each Named Executive Officer could have been awarded between 0% – 200% of that officer’s target bonus. At the time of adoption, the Compensation Committee believed that the performance amounts below to achieve Threshold, Target and Maximum performance payouts were equally uncertain and fair.

Performance Metric – Core Net Income Annual Growth:

Performance Metric – Individual and Corporate Performance:

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Individual and corporate performance consisted of the following:

Formulaic Outcome:

Core Net Income Annual Growth for 20222023 was 26.7%26.5%, exceeding the 20% level for an award of maximum bonus. Our performance resulted in each of our Named Executive Officers being entitled to an amount equal to 100% of his target bonus for 2022.2023.

The Compensation Committee then discussed the individual and corporate performance metric with our CEO and concluded that each Named Executive Officer had at least equaled or exceeded the “Met Expectations” target.“Exceeded Expectations.” Using the result of “Met“Exceeded Expectations,” each of our Named Executive Officers was entitled to an additional amount equal to 50%100% of his target bonus for 2022.2023.

Based on Core Net Income Annual Growth for 20222023 and the Compensation Committee’s conclusions regarding individual and corporate performance, each of our Named Executive Officers could have received up to 150%200% of his target cash bonus for 2022.2023. Our Compensation Committee, with the input from our CEO, determined to reduce the 20222023 incentive cash bonuses from the formulaic outcomes to the amounts set forth in the table below.

The following table provides the cash incentive bonus targets, the formulaic outcome of our 20222023 incentive program and actual cash bonuses awarded to each Named Executive Officer in 2022.2023. Each bonus was paid in January 20232024 but is reflected as 20222023 compensation.