SBA Prepay Commentary
November 2021 SBA Prepayment Speeds
Prepayment speeds on both equipment and real-estate loan pools increased for the seventh time in eight months. These are the fastest speeds seen since March 2020 and both pool types are nearing their respective pre-pandemic levels. Availability and quality of labor remains a high concern among small business owners, as reported by the NFIB, though it may be waning. 49% of business owners saying they have job openings they are unable to fill, which is two percentage points lower than the previous month. For the month of October, 44% of small business owners reported that they increased employee compensation, topping the prior month’s 48-year record high. Concerns over inflation are also growing, as 16% of respondents listed it as the single most important problem facing their business in October, up from 10% the month prior. This coincides with the FOMC’s Summary of Economic Projections reflecting similar expectations in their September 22nd release.
Equipment loan pools’ prepayments increased from 13.5 to 15.4 CPR, with almost all vintages increasing as well. Prepayments on real-estate loan pools also sped up, going from 15.0 to 17.1 CPR, though results were more mixed when viewed on a vintage-by-vintage basis.
Equipment Loan Pool CPRs
- Excluding 2014, all individual vintages experienced an uptick in prepayments.
- The largest of these increases was seen in the 2013 vintage, which went from 18.1 to 25.2 CPR.
- Most vintages are now prepaying above their respective 12-month averages, though results are more mixed when compared to their 6-month averages.
|1Equipment loan pools have original WAMs between 8 and 13 years|
Real-Estate Loan Pool CPRs
- Increases/decreases were fairly evenly mixed when viewed on a vintage-by-vintage basis.
- The largest pick up was experienced by the 2012 vintage, which went from 13.5 to 25.4 CPR. The largest drop was experienced by the 2011 vintage, which went from 26.8 to 18.5 CPR.
- Most vintages are still prepaying above their respective 6- and 12-month averages.
|2Real-estate loan pools have original WAMs greater than 18 years|
SBA Prepayment Tables (PDF)
Prepared according to methodologies described by SIFMA.
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Analyst, Investment Product Strategies
Kevin A. Smith, CFA
SVP, Director Investment Product Strategies