SBA Prepay Commentary
October 2021 SBA Prepayment Speeds
Prepayment speeds on equipment loan pools decreased for the first time since March, while those for real-estate loan pools rose for the sixth time in seven months. As can be seen in the chart below, it appears that speeds may be following the seasonal trend of plateauing during the autumn months, albeit still at lower levels than recent pre-pandemic years. Availability and quality of labor is an increasing concern among small business owners, as reported by the NFIB, with 51% of business owners saying they have job openings they are unable to fill, topping the last two months’ respective 48-year record highs. This also is likely the cause of the increase in respondents pointing to cost of labor as their primary concern. For the month of September, 42% of small business owners reported that they increased employee compensation, which is a 48-year record high percentage of respondents.
Equipment loan pools’ prepayments decreased, going from 14.5 to 13.5 CPR, with most individual vintages seeing reduced speeds. Prepayments on real-estate loan pools picked up, rising from 13.4 to 15.0 CPR, an increase also seen among most individual vintages.
Equipment Loan Pool CPRs
- Prepayments for mostly slowed when viewed on a vintage-by-vintage basis.
- The largest of these decreases was seen in the 2012 vintage, which went from 73.2 to 20.2 CPR.
- Results are mixed when comparing vintages’ speeds to 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 individual vintages saw an increase in prepayments.
- The largest pick up was experienced by the 2016 vintage, which went from 17.5 to 25.1 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|
Prepared according to methodologies described by SIFMA.
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Analyst, Investment Product Strategies
Kevin A. Smith, CFA
SVP, Director Investment Product Strategies