SBA Prepay Commentary
May 2021 SBA Prepayment Speeds
Prepayments continued to speed up for the month of May, which should come as no surprise given the direction of COVID-19 vaccinations and restrictions along with general seasonal trends. The NFIB Small Business Optimism Index for April came in at 99.8, a third-straight increase. When surveyed about the single most important problem they are facing, only 8% of small business owners responded with concerns over poor sales, the lowest percentage since before the pandemic hit the United States. Looking forward, hopes will likely be high for businesses’ outlook as over 45% of the US adult population has been fully vaccinated against COVID-19 and the CDC no longer recommends social distancing for vaccinated individuals. Given that prepayments historically pick up in the summer, last year notwithstanding, speeds may continue to rise over the next few months as they gear back towards seasonal norms.
Equipment loan pools’ prepayments rose from 8.7 to 11.4 CPR, an increase reflected on a vintage-by-vintage basis. Speeds on real-estate loan pools sped up as well, going from 9.1 to 10.8 CPR, this pick up could also be seen in most individual vintages.
Equipment Loan Pool CPRs
- All but the 2016 vintage saw an increase in prepayments for the month.
- The largest increase was experienced by the 2012 vintage, which went from 12.2 to 40.2 CPR.
- Most vintages were above their respective 6- and 12-month average speeds.
|1Equipment loan pools have original WAMs between 8 and 13 years|
Real-Estate Loan Pool CPRs
- Most vintages experienced an increase in prepayments, with exception to 2019, 2014, and 2008 pools.
- The largest increase was experienced by the 2017 vintage, which went from 11.3 to 21.3 CPR. The largest decrease was experienced by the 2014 vintage, which decreased from 19.4 to 11.0 CPR.
- There is an even mix of results when comparing individual vintages speeds to their respective 6-month averages, though most are prepaying above their 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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Analyst, Investment Product Strategies
Kevin A. Smith, CFA
SVP, Director Investment Product Strategies