Main Street Monday — CPR Report: SBA 7(a) Prepays Stay Below 7%

May 2, 2016

Main Street Monday — CPR Report: SBA 7(a) Prepays Stay Below 7%

By Bob Judge
Editor, CPR Report

CPRGraph050216In March, prepays fell further below CPR 7%, reaching a level not seen since April of 2013.

The cause of this decrease was a double-digit fall in voluntary prepayments (CRR) that offset a rise in defaults (CDR).

Specifically, voluntary prepayments fell by 16% which offset a 47% rise in defaults, which were coming off the second lowest reading since 1999.

For the record, defaults have remained below CDR 2% for 31 months in a row.

Turning to the details, overall prepayments fell by 10% to 6.20% from 6.92% the previous month.

In comparing YOY prepayment speeds for 2016 versus 2015, the YTD is currently 4.77% lower than last year, CPR 6.95% versus CPR 7.29%.

As for the largest sector of the market, 20+ years to maturity, prepayment speeds fell by 2% to 6.59% from 6.74%.

Regarding the CPR breakdown, the CDR increased to 0.88% from 0.60% while the CRR fell to 5.32% from 6.31%.

Preliminary data for next month suggests that prepayments will rise close to 8% as both defaul and voluntary prepayments move higher.

Regarding our maturity buckets, prepayment speeds fell in all six categories.

Decreases were seen, by order of magnitude, in the <8 year sector (-76% to CPR 6.98%), 13-16 (-50% to CPR 2.56%), 8-10 (-40% to CPR 7.53%), 16-20 (-39% to CPR 3.67%), 10-13 (-7% to CPR 5.66%) and 20+ (-2% to CPR 6.59%).

While this month was by any measure a stellar month from a prepayment perspective, it will be short lived as next month brings back higher speeds.

In the meantime, enjoy the good news.