September 26, 2017
By Bob Judge
Editor, CPR Report
SBA Hot Topic Tuesday — SBA 7(a) Prepays Fall Back Below 9%
In June, prepays fell by another 5%, moving back below CPR 9% after a two-month hiatus, coming in at CPR 8.60%.
An decrease in both defaults (CDR) and voluntary prepayments (CRR) led to the fall in the CPR. Specifically, defaults fell by 7% to CDR 1.14% while voluntary prepayments decreased by 5% to CRR 7.47%.
For the record, defaults have remained below CDR 2% for 46 months in a row. In comparing YOY prepayment speeds for 2017 versus 2016, this year is running 10% (8.48% vs. 7.68%) above last year after six months.
As for the largest sector of the market, 20+ years to maturity, prepayment speeds fell by 4% to 8.56% from 8.94% previously. Preliminary data for next month suggests that prepayments will be close to unchanged and stay below 9% for a second month in a row.
It looks like we may be poised for a run of sub-9% prepayment speeds for the next few months. We’ll wait to see what happens in the fourth quarter.