January SBA Prepayment Speeds
Equipment and Real-Estate SBA 7(a) pools both gave back some of the December declines and posted increases month-over-month. Equipment pools overall posted a manageable increase of only 2%, but this warrants taking a deeper look at the vintage buckets. Real-Estate pools, on the other hand, posted a 16% increase.
Equipment Loan Pools
While in total, CPRs for the Equipment pool population increased by only 2%, there is quite a bit of variance even when only looking at vintages with meaningful outstanding balances. For example, investors concentrated in 2017 originations are looking at a 30% increase month-over-month whereas those with more exposure to 2016 and 2015 origination are respectively looking at declines of 4% and 20%.
Real-Estate Loan Pools
Real-Estate speeds by vintage were more uniform. Every vintage of consequence (save 2018) posted fairly hefty month-over-month increases at or north of 20%.
A Few Thoughts to Keep in Mind
- It is the general nature of speeds on 7(a) pools to eventually increase as they season, so it isn’t necessarily surprising to us that both 2017 vintages (Equipment and Real-Estate) saw large percent increases.
- Critically important to evaluate pools at a wide variety of speeds and also using a historically-based prepayment vector.
- The Vining Sparks Performance Profile includes an analysis of your 7(a) pools layered against a historical prepayment vector, please let your Representative know or contact me directly if you would like an analysis of your portfolio.
Prepared according to methodologies described by SIFMA.
Kevin A. Smith, CFA
SVP, Director Investment Product Strategies
Analyst, Investment Product Strategies