March SBA Prepayment Speeds
March 14, 2018
Overall speeds for SBA floating-rate pools fell last month by almost 2CPR for equipment loan pools and declined by almost 2.5CPR for longer-amortization real-estate pools. In the case of equipment pools, the decline more than offset last month’s 1.1CPR increase. Real-estate pool speeds declined last month by a meager 0.1CPR, so a second monthly decline doesn’t reveal any sort of trend. After taking this decline into account, speeds remained consistent enough with the overall patterns of the previous five months that most changes can be attributed to monthly calendar and day count, seasonality in general, and statistical noise. For many SBA 7(a) portfolios, the seasoning ramp resulted in more significant changes since October than any monthly trends.
While still statistically noisy, six months of data present a useful picture of prepayment patterns that can be expected over the life of an SBA pool. Any investors using this history to derive expectations should be wary of statistical noise still in the data and also should be cognizant of potential impacts of seasonal patterns likely to emerge over the coming months. That being said, the below graphs show an emerging picture of the CPRs occurring over the various vintages arranged with the most recent vintage on the left, so as to depict the prepayment patterns occurring on both equipment and real-estate pools. As more monthly data comes in, these patterns should provide a picture of SBA prepayments that proves useful as well as interesting.
Prepared according to methodologies described by SIFMA.
Director of Investment Product Strategies