SBA Hot Topic Tuesday — CPR Report: SBA 7(a) Prepays Start 2016 Below 8%

March 29, 2016

SBA Hot Topic Tuesday — CPR Report: SBA 7(a) Prepays Start 2016 Below 8%

By Bob Judge
Editor, CPR Report


bobjudgeIn January, prepays rose slightly from December, but stayed below 8% as we begin tracking 2016.

The cause was a double-digit increase in defaults (CDR) that was mostly offset by a decrease in voluntary prepayments (CRR).

Specifically, defaults rose by 30% from an all-time low recorded in December, reaching CDR 0.67%. For the record, this reading is the second lowest since 1999 and defaults have now remained below CDR 2% for the 29th month in a row.

Turning to the details, overall prepayments rose by 0.56% to 7.73% from 7.69% the previous month.

In comparing YOY prepayment speeds for 2016 versus2015, the YTD, albeit for only one month, is 12.57% lower than 2015, CPR 7.73% versus CPR 8.85%.

As for the largest sector of the market, 20+ years to maturity, prepayment speeds fell by 9% to 7.03% from 7.76%.

Regarding the CPR breakdown, the CDR increased by 30% to 0.67% while the CRR fell by 2% to 7.06%.

Preliminary data for next month suggests that prepayments will go below 7% as defaults continue to remain low.

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

Decreases were seen, by order of magnitude, in the 13-16 year sector (-24% to CPR 11.95%), 20+(-9% to CPR 7.03%) and <8 (-.05% to CPR 13.45%).

Increases were seen, also by order of magnitude, in 8-10 (+39% to CPR 8.30%), 10-13 (+29% to CPR 8.67%) and 16-20 (+15% to CPR 9.71%).

It looks like prepayment speeds for 2016 are beginning at or below 2015, at least for the first few months of the year.

For further information on the terminology and concepts used in this article, please refer to the “Glossary and Definitions” at the end of the report.

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