- Collateralized Mortgage Obligations (CMO) and CMO Tranches
- Stripped MBS – Interest Only (IO) and Principal Only (PO)
- Residential Non-Agency MBS
- CMBS: Structure and Call Protection
- Amortizing Loans vs. Non-Amortizing Loans
- Overview of Asset Backed Securities (ABS)
- Internal and External Credit Enhancements
- Pay-through Structures: Prepayment Tranching vs. Credit Tranching
- Home Equity Loans (HEL) Backed Securities
- Manufactured Housing Backed Loans
- Auto Loans Backed Securities
- Student Loan Backed Securities (SLABS)
- SBA Loan Backed Securities
- Credit Card Receivable Backed Securities
- Collateralized Debt Obligations (CDOs) and Synthetic CDOs
- Cash Flow Yield, Nominal Spread, and Zero Volatility Spread for ABS/MBS
- Monte Carlo Simulation for ABS/MBS
- CFA Level 2: Fixed Income Part 2 – Introduction
- Duration and Convexity for ABS/MBS
- Mortgage Cash Flow Characteristics
- Choosing an Appropriate Spread for ABS/MBS
- Mortgage Pass-through Securities: Characteristics and Risks
- Cash Flows and Prepayment Risk
- Single Monthly Mortality (SMM) & Conditional Prepayment Rate (CPR)
- PSA Prepayment Benchmark
SBA Loan Backed Securities
SBA backed ABS are securities whose underlying assets are loans from the Small Business Administration of the U.S. government.
The SBA is a US Government agency that guarantees the loans made by approved SBA lenders to qualified borrowers. Since, the SBA loans are backed by the U.S. government, it lowers credit risk.
The pooled loans must have similar terms and features, such as capped or uncapped. The different maturities used for pooling loans together are 7, 10, 15, 20 and 25 years.
SBA loans are commonly floating rate. The reference rate is the prime rate. The payments are made monthly and include both interest and principal repayments.
The prepayments are largely driven by the borrowing purpose. Shorter maturity loans tend to have higher prepayment speed. Studies suggest that the loans with maturities of less than 10 years made for the purpose of working capital needs have the fastest prepayment speed. On the other hand, loans for real estate purposes have the slowest prepayment rates. Loans with capped interest rates prepay slower than uncapped loans.