C-Suite Wednesday: CPR Report — SBA 7(a) Prepays Higher, Stay Above 8%

September 28, 2016

C-Suite Wednesday: CPR Report — SBA 7(a) Prepays Higher, Stay Above 8%

By Bob Judge
Editor, CPR Report

In July, prepays rose by 9%, staying above CPR 8% for the fourth month in a row.

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

Specifically, defaults rose by 9% while voluntary prepayments moved up by 8%.

For the record, defaults have remained below CDR 2% for 35 months in a row.

Turning to the details, overall prepayments rose by 9% to 8.91% from 8.16% the previous month.

In comparing YOY prepayment speeds for 2016 versus 2015, the YTD is currently 4.13% higher than last year, CPR 7.86% versus CPR 7.55%.

As for the largest sector of the market, 20+ years to maturity, prepayment speeds fell by 2% to 8.40% from 8.55%.

Regarding the CPR breakdown, the CDR increased to 1.11% from 0.91% while the CRR rose to 7.81% from 7.26%.

Preliminary data for next month suggests that prepayments will fall below 8% for the first time since February.

Regarding our maturity buckets, prepayment speeds rose in three out of six categories.

Increases were seen in the 13-16 year sector (+334% to CPR 8.36%),

Decreases were seen, by order of magnitude, in the 8-10 year sector (-18% to CPR 10.78%), 16-20 (-4% to CPR 9.47%) and 20+ (-2% to CPR 8.40%).

While we expect a respite from +8% prepays next month, this month showed more evidence that we are in a 8-9% CPR world.