SBA Prepay Commentary
April 2021 SBA Prepayment Speeds
After prepayments declined for three of the previous four months, speeds reversed course for April. This is perhaps reflective of business owners’ growing positivity, gauged by the NFIB Small Business Optimism Index. For the month of March, the index came in at 98.2, which is both 2.4 points higher than the previous month and is the first time it has been in-line with the historical average since November. While government restrictions have begun to roll back and a significant portion of the population has been vaccinated against COVID-19, business owners’ concerns over poor sales have dropped to their lowest level in a year. This growing optimism, mixed with the historical trend of increased prepayments in the warmer months, may be an indication that speeds will continue to ramp in the coming months.
Equipment loan pools’ prepayments saw a slight uptick, going from 8.6 to 8.7 CPR, though results were mixed among vintages. Speeds on real-estate loan pools increased as well, going from 7.2 to 9.1 CPR, which was reflected in most individual vintages.
Equipment Loan Pool CPRs
- There was a pretty even mix among vintages’ prepayments speeding up or slowing down.
- The largest increase was experienced by the 2014 vintage, which went from 9.1 to 15.8 CPR. The largest decrease was experienced by the 2013 vintage, which dropped from 25.7 to 14.1 CPR.
- Most vintages were below their respective 6-month average speeds, and results are mixed when comparing to their 12-month averages.
|1Equipment loan pools have original WAMs between 8 and 13 years|
Real-Estate Loan Pool CPRs
- Most vintages experienced an increase in prepayments.
- The largest increase was experienced by the 2008 vintage, which went from 5.6 to 27.2 CPR. The largest decrease was experienced by the 2012 vintage, which slowed from 21.8 to 11.3 CPR.
- There is an even mix of results when comparing individual vintages speeds to their respective 6- and 12-month averages.
|2Real-estate loan pools have original WAMs greater than 18 years|
Prepared according to methodologies described by SIFMA.
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Analyst, Investment Product Strategies
Kevin A. Smith, CFA
SVP, Director Investment Product Strategies