medium · Asset-Backed Securities asset-nuances
A $100 million pool of SBA 7(a) loans is being securitized. The analyst notes that 'graduation' is a significant driver of prepayments.
In this context, what does graduation refer to?
- Successful borrowers qualifying for conventional bank credit and paying off their SBA loans
- The loans reaching the end of their interest-only 'teaser' period and starting principal amortization
- The process of a defaulted borrower entering a formal workout with the Special Servicer
- The government increasing the guarantee percentage on a pool as it seasons
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