SBA Prepay Commentary
July 2020 SBA Prepayment Speeds
As expected, July’s prepayments were low, continuing to buck the trend of higher speeds usually seen during summer months. Though there was a slight increase over prepayments last month, both Equipment and Real-Estate loan pools are still close to last month’s historic lows. The Paycheck Protection Program (PPP), which as of July 14 has provided loans to 4.9 million businesses with an average loan size of $105,194, recently had its application deadline extended from June 30 to August 8. This extension should help further reduce the number of defaults, at least for the time being, keeping prepayment speeds similarly low in the following months.
Equipment loan pools increased from 5.4 to 6.2 CPR, though results were mixed among vintages. After five months of declines, Real-Estate loan pools experienced their first increase, going from 5.6 to 6.3 CPR, though individual vintages again experienced mixed results.
Equipment Loan Pool CPRs
- Equipment loan pools look to have leveled out after declining for five of the last six months.
- Results were relatively evenly mixed on a vintage-by-vintage basis.
- The largest decrease was seen by the 2012 vintage, which dropped from 8.0 to 5.6 CPR. The largest increase was seen by the 2011 vintage, which picked up from 6.1 to 17.1 CPR.
- Every vintage is still well below its 6- and 12-month averages.
|1Equipment loan pools have original WAMs between 8 and 13 years|
Real-Estate Loan Pool CPRs
- Real-Estate prepayments saw their first month-over-month increase since January.
- Results among vintages were mixed.
- The largest decrease was seen by the 2008 vintage, which dropped from 7.0 to 0.3 CPR. The largest increase was seen by the 2015 vintage, which climbed from 1.7 to 9.5 CPR.
- As expected, every vintage’s speed is lower than its 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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Kevin A. Smith, CFA
SVP, Director Investment Product Strategies
Analyst, Investment Product Strategies