SBA Prepay Commentary
September 2020 SBA Prepayment Speeds
September prepayments was yet another month’s contribution to a season of historically low speeds. In the past, prepayments have tended to taper off as the calendar transitions to the fall months. While a similar dip is unlikely this year given how low speeds were over the summer, it is reasonable to assume that they will remain at their current low levels in the coming months given historic trends and the current economic uncertainty. There is a chance, however, that speeds could pick up to a degree due to defaults, as there has been little talk lately about another round of Paycheck Protection Program loans after last month’s application deadline for the program.
Equipment loan pools decreased from 6.8 to 5.9 CPR, with results evenly mixed among vintages. Real-estate loan pools also dropped, going from 6.2 to 5.7 CPR, their seventh decrease in the last eight months.
Equipment Loan Pool CPRs
- Results were relatively evenly mixed on a vintage-by-vintage basis.
- The largest decrease was seen by the 2013 vintage, which dropped from 18.9 to 8.0 CPR. The largest increase was seen by the 2012 vintage, which picked up from 9.0 to 17.0 CPR.
- Excluding 2020 and 2011 pools, every vintage is still below its 6- and 12-month averages.
|1Equipment loan pools have original WAMs between 8 and 13 years|
Real-Estate Loan Pool CPRs
- Real-estate loan pools have continued the downward trend they have had for all but one month since January.
- Results among individual vintages were evenly mixed.
- The largest decrease was seen by the 2010 vintage, which reduced from 17.8 to 2.7 CPR. The largest increase was seen by the 2011 vintage, which rose from 4.0 to 15.7 CPR.
- Excluding 2011 pools, all vintages are still experiencing prepayments below their 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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Kevin A. Smith, CFA
SVP, Director Investment Product Strategies
Analyst, Investment Product Strategies