Reviewing SBA Lender Quality and Prepayment Risk
The Challenge
Premium-priced SBA guaranteed portions are sensitive to principal returning earlier than expected. Lender history provides context for evaluating that risk.
The Solution
Review the available SBA lender-quality data and loan-level pricing assumptions together, retaining the reporting period and source limitations.
Review the sources
The lender-quality methodology uses SBA FOIA records and regulatory financial data. Check the coverage and reporting period for the lender being evaluated.
Connect credit history to prepayment
A default payment on the guaranteed portion can return principal at par. Review how this affects premium amortization, expected life and yield under the proposed purchase terms.
Review the pool
Check the actual loan terms, servicing and prepayment assumptions. Historical lender performance is context for analysis, not a promise about a particular pool.
Record the decision basis
Retain the reviewed inputs and output with the investment decision. Confirm current availability and transaction terms with the desk.
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