Originations of SBA 504 loans accelerated again during the past month.
Through September 3, 2021, SBA 504 loan originations are up 51.9% compared to the prior year, reaching $8.09 billion year-to-date in FY2021 versus $5.32 billion during the same period in FY2020. Last month, originations were up 45.1% compared to the prior year. Unpaid Principal Balance of SBA 504 loan stood at $27.41 billion as of March 31, 2021, up 0.8% compared to the $27.20 billion figure at year-end FY2020. SBA 7(a) loan originations also accelerated during the past month. They are now up 57.7% through July 30, 2021 (they were up 44.7% through July 30, 2021) compared to the same period in FY2020 and the unpaid principal balance of 7(a) loans is $99.71 billion at March 31, 2021, up 2.5% 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 FY2020 (2.3% in FY2020, 2.9% in FY2019 and 7.2% in FY2018). However, 504 loans broke out of the tight range between $25 billion and $27 billion it has occupied over the last nine years, growing 5.5% to $27.2 billion at year- end FY2020. Of course, the published 504 loan figures in the chart above includes only the CDC/SBA second lien portion of a 504 loan package, which typically amounts to roughly 40% of the financing. The first lien loan financing typically accounts for another 50% of 504 projects, meaning the actual program totals would be more than double the figures shown in the graph above.
Loan originations in the 504 program are growing noticeably, despite the volatility driven by changing COVID conditions. Total originations in FY2021 through September 3rd are up 51.9% compared to FY2020 and well in excess of the volumes achieved at this point in any of the last five years. In dollar terms, most of the growth is being led by mid- and large size loans. In fact, the largest size loan groupings are achieving the highest percentage growth, with loans of $350k- $2.0M rising 50.7% YTD and Loans greater than $2.0M climbing 55.9%.
Community Reinvestment Act: Proposal to Rescind and Replace Community Reinvestment Act Rule Issued in 2020
On September 8, 2021, the Office of the Comptroller of the Currency (OCC) issued a proposal to rescind the Community Reinvestment Act (CRA) rule that the OCC published in June 2020 and replace it with rules based largely on the rules adopted jointly by the federal banking agencies in 1995.
The Federal Reserve Board, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) are committed to working together to jointly strengthen and modernize regulations implementing the Community Reinvestment Act (CRA).
