SBA Prepay Commentary
February SBA Prepayment Speeds
In total, Equipment and Real-Estate SBA 7(a) pools both posted pretty dramatic declines after increasing the prior month. The government shutdown didn’t affect the processing of loan payments, so that should have no bearing on the speeds we see. Equipment pools, overall, printed a CPR of 13.62, but this warrants taking a deeper look at the vintage buckets. Real-Estate pools posted a 15.76 CPR for the month, a decline of 2.65 from the previous month.
Equipment Loan Pools
While in total, CPRs for the Equipment pool population decreased from 15.09 to 13.62, the vast majority of the decline can be attributed to the nearly 6 CPR decline in the 2017 vintage. Last month, the 2017 vintage posted a comparatively outsized increase. Certainly some choppiness in the comparison but I’d expect the 2017 vintage to revert back towards the mean.
Real-Estate Loan Pools
Real-Estate speeds by vintage were more uniform. Every vintage of consequence (save 2018 and 2014) posted declines. The largest, and most curious decline in my opinion, is the 2015 vintage CPR getting chopped nearly in half compared to the previous month. Historically, around this point in a Real-Estate pool, speeds level off around 25 CPR +/-. We should keep an eye on this vintage over the next couple of months to see if there is a push back towards the average.
A Couple Thoughts
- It is critically important to evaluate pools at a wide variety of speeds and also using a prepayment vector.
- Our Performance Profile includes an analysis of your 7(a) pools layered against a historical prepayment vector. Please let your Representative know or contact me directly if you would like one.
Prepared according to methodologies described by SIFMA.
Kevin A. Smith, CFA
SVP, Director Investment Product Strategies
Analyst, Investment Product Strategies