SBA Prepay Commentary
March 2022 SBA Prepayment Speeds
Inflation continues to be a growing worry for small business owners, as 26% of respondents to the NFIB Small Business Economic Trends survey listed it as the single biggest problem they’re currently facing, the highest percentage in over 30 years. A net 46% of small business owners responded that they plan on raising selling prices while 68% of respondents reported doing so over the last month. These worries, along with the still-elevated concerns over cost and quality of labor (11% and 22%, respectively), an economy recovering from the pandemic, and worldwide impacts due to the ongoing conflict in Ukraine, could put downward pressure on prepayments in the coming months.
Speeds on both equipment and real-estate loan pools decreased in February. Equipment loan pools’ prepayments slowed from 21.5 to 18.3 CPR, with most individual vintages experiencing decreases. Speeds on real-estate loan pools declined from 18.4 to 14.7 CPR, which was also the case for most pools when viewed on a vintage-by-vintage basis.
Equipment Loan Pool CPRs
- After climbing back to pre-pandemic levels, equipment loan pools experienced their second month-over-month decrease in the last twelve months.
- The largest of these decreases was seen in the 2013 vintage, which went from 72.8 to 34.3 CPR.
- Despite this most recent slowdown, prepayment speeds on most vintages remain above their respective 6- and 12-month averages.
|1Equipment loan pools have original WAMs between 8 and 13 years|
Real-Estate Loan Pool CPRs
- Most individual vintages saw a decrease in prepayment activity, though a few outliers did see speeds increase.
- The largest decrease was seen by the 2011 vintage, which went from 47.6 to 16.7 CPR.
- Most vintages have faster prepayments than their respective 12-month averages, though results are mixed when comparing to their respective 6-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