SBA Update

September 10, 2018



SBA activity was focused on the DCPC auction last Thursday, which included 10yr, 20yr and 25yr terms.  Demand for DCPCs and SBICs (SBIC semi-annual auction pricing later this week or next) remains strong as they offer superior convexity profiles to most residential MBS alternatives, while offering comparable yields and spreads.

 

Fixed-Rate DCPC Pools



Fixed-Rate SBIC Debentures




Floating-Rate 7(a) Pools

 

Government Guaranteed Loan Trading

Government-guaranteed USDA agricultural loans and SBA loans actively traded to financial institutions last week.  As has been the case for some time, supply and not demand limits loan trading volumes.

 

Maturity Band Tightening – October 1st

The SBA has announced and the Federal Register now reflects a slight tightening of the maturity bands for new SBA pools issued subsequent to October 1st.  The shortest maturity of any loan in a pool issued subsequent to October 1st will now need to be at least 95% of the longest, adjusted upward from the current 94%. This brings cash flows on pools in closer alignment with cash flows on the underlying loans, a stated objective of the SBA.  In essence, this brings pools one small step closer to being true pass-throughs.  The change has zero effect on any existing pools.

 



Dan Stimpson, CPA

Senior Vice President

Vining Sparks

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