SBA Prepay Commentary

June 2020 SBA Prepayment Speeds

June 2020

Back in the March SBA Prepayment Commentary, we wrote, “While prepayments have historically begun to pick up in the spring and summer, that may not be the case this year … In the short-term, it seems reasonable that prepayment speeds will likely decline as many businesses will prefer to stockpile liquidity than pay down debt.” That turned out to be an understatement, as this month’s prepayments saw the largest month-over-month drop in years. While the PPP Flexibility Act signed by President Trump last week may give business owners a bit more flexibility in their decision whether or not to prepay on their loans, it also extends the protection against defaults. Keep in mind, from an investor’s perspective, defaults are counted the same way as prepayments, so this extra cushion from PPP should keep speeds lower. Combining this with the continued widespread effects of COVID-19 worldwide and uncertainty about its projections, it is likely that this summer season will be a historically low prepayment period.

Equipment loan pools dropped from 12.4 to 5.4 CPR, with every vintage experiencing declines. Real-Estate loan pools decreased for the fifth straight month, going from 12.5 to 5.6, though a couple vintages did experience small increases.

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 (June) | Monthly, 5th business day

Dan Stimpson, CPA

Senior Vice President, Investment Strategies

Vining Sparks

Adam Hofer

Analyst, Investment Product Strategies

Vining Sparks

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