SBA Prepay Commentary

August 2020 SBA Prepayment Speeds

As we have seen over the last few months, current prepayment speeds have been far lower than those of previous summers, and those for the month of August were no exception. Speeds on both equipment and real-estate loan pools were fairly in-line with last month and continue to be at a fraction of their prior levels. Now that we have passed the August 8th application deadline for the Paycheck Protection Program (PPP), future prepayments will be a function of upcoming business conditions as well as whatever form of small-business stimulus Congress decides upon next. While additional funding is expected, it is likely that the next stimulus package will be both smaller and have more restrictions than the previous PPP round. This scaling back could increase the likelihood of defaults for some businesses, which in turn would bring an uptick in speeds to some degree, as defaults are viewed as prepayments from an investor’s perspective.

Equipment loan pools increased from 6.2 to 6.8 CPR, with mixed results among vintages. Real-estate loan pools, on the other hand, dropped slightly from 6.3 to 6.2 CPR, their sixth decrease in the last seven months.

Equipment Loan Pool CPRs

1Equipment loan pools have original WAMs between 8 and 13 years

Real-Estate Loan Pool CPRs

2Real-estate loan pools have original WAMs greater than 18 years

SBA Prepayment Tables (PDF)

Prepared according to methodologies described by SIFMA.

Other Helpful Links

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Investment Alternatives Matrix | Weekly, Tuesday

MBS Prepay Commentary (August) | Monthly, 5th business day

Kevin A. Smith, CFA

SVP, Director Investment Product Strategies

Vining Sparks

Adam Hofer

Analyst, Investment Product Strategies

Vining Sparks

The information included herein has been obtained from sources deemed reliable, but it is not in any way guaranteed, and it, together with any opinions expressed, is subject to change at any time. Any and all details offered in this publication are preliminary and are therefore subject to change at any time. This has been prepared for general information purposes only and does not consider the specific investment objectives, financial situation and particular needs of any individual or institution. This information is, by its very nature, incomplete and specifically lacks information critical to making final investment decisions. Investors should seek financial advice as to the appropriateness of investing in any securities or investment strategies mentioned or recommended. The accuracy of the financial projections is dependent on the occurrence of future events which cannot be assured; therefore, the actual results achieved during the projection period may vary from the projections. The firm may have positions, long or short, in any or all securities mentioned. Member FINRA/SIPC.
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