SBA Prepay Commentary
February 2021 SBA Prepayment Speeds
After an unexpected uptick last month, February speeds decreased, falling back in line with historical trajectory trends. This may be due in part to seasonality as well as January having fewer business days than the month prior, but other factors could also be at play in this decline. Small business owners remain concerned over their sales, with confidence wavering in the last several months and recently hitting an eight-month low according to an NFIB survey (see graph below). However, the effects of both the upcoming government stimulus checks and an increasing percentage of the population vaccinated for COVID-19 may instill fewer concerns in small business owners’ outlook. Combine this potential confidence boost with speeds’ historical seasonality during the spring and summer, and there is potential for a pickup in prepayments in the coming months.
Equipment loan pools’ prepayments decreased from 13.8 to 10.7 CPR; a trend reflected in almost every vintage. Real-estate loan pools also dropped, going from 12.3 to 10.5 CPR, though individual results were mixed across vintages.
Equipment Loan Pool CPRs
- Most vintages saw a drop in prepayments, with 2020 and 2011 pools being the only exceptions.
- The largest decrease was experienced by the 2012 vintage, which went from 36.3 to 22.0 CPR.
- Most vintages are now below their respective 6-month average speeds, but results are evenly mixed when compared to their 12-month averages.
|1Equipment loan pools have original WAMs between 8 and 13 years|
Real-Estate Loan Pool CPRs
- The change in prepayments was evenly mixed when compared among vintages, as there were both small and large shifts seen in both directions.
- The largest decrease was experienced by the 2013 vintage, which dropped from 21.9 to 10.6 CPR. The largest increase was experienced by the 2007 vintage, which went from 12.2 to 20.0 CPR.
- Results are also mixed among vintages when comparing to their 6-month 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