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%
In 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.
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.
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