SBA 504 loan originations started the new SBA fiscal year (FY2022) with a bang.
Five weeks into the new fiscal year (started October 1st), 504 loan originations are up 163.4% compared to the same period a year ago. If you’re thinking that this is due to COVID effects in the prior year, originations this year are up 127.3% compared to the same period two years ago, which was pre-COVID. Originations were up 41.0% in the fiscal year ended September 30, 2021. Unpaid Principal Balance of SBA 504 loan stood at $28.94 billion as of September 30, 2021, up 6.4% compared to the $27.20 billion figure at year-end FY2020. SBA 7(a) loan originations started the year more slowly, exhibiting a 28.5% decline compared to the same period the previous year after rising 62.0% in FY2021. The unpaid principal balance of 7(a) loans is $103.89 billion at September 30, 2021, up 6.8% compared to year-end FY2020.
The 7(a) program has shown steady growth in loan outstandings in recent years that continued through the end of FY2021 (6.8% in FY2021, 2.3% in FY2020, and 2.9% in FY2019). 504 loans have shown accelerating growth, rising 6.4% to $28.9 billion at year-end FY2021, after climbing 5.5% in FY2020 and (0.2%) in FY2019. Of course, the published 504 loan figures in the chart above include only the CDC/SBA second lien portion of a 504 loan package, If we include the private lender portion of the same loan projects, which typically accounts for 50% of 504 projects, The total for SBA 504 loan outstandings (1st and 2nd liens combined) would be somewhere in the neighborhood of $65 billion, still below 7(a) totals, but much closer.
Charge-off rates for the major SBA loan programs remain very low. The chart to the left shows charge-off rates for the CDC/SBA-held second lien position (504 Regular), as well as charge-off rates in the short-lived FMLP program (504 First Lien), authorized in 2009 and ending in 2012. This program held pools of 504 first liens. While accurate data on the privately-held 504 first lien loans is not available, the fact that these loans are in a last loss position after the second lien loans leads to a presumption that charge-off rates would be considerably lower than for the second lien loans.
Governor Kathy Hochul signs legislation expanding New York Community Reinvestment Act to non-depository lenders
When the CRA was enacted in 1978, banks originated the vast majority of mortgages. Since the 2008 financial crisis, non-depository lenders have dramatically increased their market share, and nonbanks are now responsible for a majority of mortgage originations in New York State and nationally.