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

Weekly Sector Update | Weekly, Monday

Market Today | Daily

Weekly Recap | Weekly, Friday

Brokered Deposit Rate Indications | Weekly, Monday

Investment Alternatives Matrix | Weekly, Tuesday

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





Kevin A. Smith, CFA

SVP, Director Investment Product Strategies

Vining Sparks

KSmith@viningsparks.com


Adam Hofer

Analyst, Investment Product Strategies

Vining Sparks

AHofer@viningsparks.com


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