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SBA Hot Topic Tuesday: SBA 7(a) Prepays Move Below 8%

October 25, 2016

By Bob Judge
Editor, CPR Report

SBA Hot Topic Tuesday: SBA 7(a) Prepays Move Below 8%

BobJudgeIn August, prepays fell by 15%, going below CPR 8% for the first time since March.

A fall in both defaults (CDR) and voluntary prepayments (CRR) was the cause of the decrease.

Specifically, defaults fell by 12% while voluntary prepayments moved down by 16%.

For the record, defaults have remained below CDR 2% for 36 months in a row.

cprgraph102516

Turning to the details, overall prepayments fell by 15% to 7.54% from 8.91% the previous month.

In comparing YOY prepayment speeds for 2016 versus 2015, the YTD is currently 1.91% higher than last year, CPR 7.82% versus CPR 7.67%.

As for the largest sector of the market, 20+ years to maturity, prepayment speeds fell by 7% to 7.85% from 8.40%.

Regarding the CPR breakdown, the CDR decreased to 0.98% from 1.11% while the CRR fell to 6.57% from 7.81%.

Preliminary data for next month suggests that prepayments will go back above 8% after a one month hiatus.

Regarding our maturity buckets, prepayment speeds fell in five out of six categories.

Decreases were seen, by order of magnitude, in the 13-16 year sector (-85% to CPR 1.24%), 16-20 (-57% to CPR 4.07%), 10-13 (-27% to CPR 6.94%),

The lone increase was seen in 8-10, which rose by 12% to CPR 12.07%.

After a one-month respite from +8% prepays, next month we head back to near 9% once again.

Download the CPR Report

SBA 7(a) Secondary Market Quotes

Maturity Spread Price Weekly % Change Monthly % Change
8 Years P + 2.75 109.625 +0.000% +0.573%
10 Years P + 2.75 112.125 +0.076% +0.561%
15 Years P + 2.75 113.750 +0.000% +0.573%
20 Years P + 2.75 115.500 +0.217% +0.573%
25 Years P + 2.75 117.000 +0.214% +0.645%

Source: Government Loan Solutions

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