SBA Prepay Commentary
May 2020 SBA Prepayment Speeds
After three straight months of declining prepayments for both loan pool types, Equipment pools increased slightly for the month of May while Real-Estate pool speeds continued to decrease as expected. This past month also saw a second round of funding for Paycheck Protection Program (PPP) loans to the tune of $310 billion. As of May 14th, 2.7 million businesses have been approved for these loans with an average loan size of $71,254. As the effects of the COVID-19 pandemic carries on, it is fair to assume many businesses will continue withholding from making loan prepayments for the sake of maintaining available liquidity. Pairing this hesitancy with the cushion PPP can provide against defaults, one would expect to continue to see low speeds such as these in the coming months.
Equipment loan pools increased from 12.0 to 12.4 CPR, with results mixed among individual vintages. Real-Estate loan pools decreased yet again, going from 13.4 to 12.5, though results were also mixed on a vintage-by-vintage basis.
Equipment Loan Pool CPRs
- Equipment pools increased their overall prepayments for the first time since January.
- Results were mixed among vintages, with the largest decrease being 2013 pools (17.6 to 10.6 CPR) and the largest increase being 2012 pools (10.7 to 22.5 CPR).
- Every vintage is still below its 6-month average, but newer pools (2017-2019) now sit above their 12-month averages.
Real-Estate Loan Pool CPRs
- Real-Estate prepayments declined for the fourth straight month.
- Results among individual vintages were mixed, with the largest decrease being 2007 pools (14.2 to 9.0 CPR) and the largest increase being 2014 (16.6 to 25.8 CPR) and 2009 pools (11.2 to 20.4 CPR).
- Almost all vintages’ speeds are well-below both their 6- and 12-month averages.
Prepared according to methodologies described by SIFMA.
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Strategic Insight: Mortgage Rates and Prepayment Speeds
Kevin A. Smith, CFA
SVP, Director Investment Product Strategies
Analyst, Investment Product Strategies