December 5, 2016
By Bob Judge
Editor, CPR Report
Main Street Monday — CPR Report: SBA 7(a) Prepays Back Above 8%
In September, prepays rose by 18%, going back above CPR 8% for the fifth time this year.
A rise in both defaults (CDR) and voluntary prepayments (CRR) was the cause of the increase.
Specifically, defaults rose by 41% while voluntary prepayments moved up by 14%.
For the record, defaults have remained below CDR 2% for 37 months in a row.
Turning to the details, overall prepayments rose by 18% to 8.88% from 7.54% the previous month.
In comparing YOY prepayment speeds for 2016 versus 2015, the YTD is currently 3.3% higher than last year, CPR 7.94% versus CPR 7.69%.
As for the largest sector of the market, 20+ years to maturity, prepayment speeds rose by 15% to 9.07% from 7.85%.
Regarding the CPR breakdown, the CDR increased to 1.38% from 0.98% while the CRR rose to 7.51% from 6.57%.
Preliminary data for next month suggests that prepayments will go back below 8% after one month above that benchmark.
Regarding our maturity buckets, prepayment speeds rose in four out of six categories.
Increases were seen, by order of magnitude, in the 13-16 year sector (+685% to CPR 9.72%), 16-20 (+99% to CPR 8.09%), 10-13 (+18% to CPR 8.22%) and 20+ (+16% to CPR 9.07%).
Decreases were seen, also by order of magnitude, in <8, which fell by 31% to CPR 11.88% and 8-10 (-9% to CPR 11%).
While we are once again above CPR 8%, it will be short-lived, as prepays will fall back below that benchmark as we near the end of the year.