Public Securities Association Standard Prepayment Model - PSA

Public Securities Association Standard Prepayment Model - PSA
An assumed monthly rate of prepayment that is annualized to the outstanding principal balance of a mortgage loan.

The PSA model is one of several models used to calculate and manage prepayment risk. The PSA model acknowledges that prepayment assumptions will change during the life of the obligation and affect the yield of the security. The model assumes a gradual rise in prepayments, which peaks after 30 months. The standard increase amount is 0.2%, so an indicator of 100% implies that the rate will increase monthly by 0.2% (the standard increase), whereas an indicator of 0% implies no monthly changes of the prepayment rate.

Investment dictionary. . 2012.

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Look at other dictionaries:

  • PSA prepayment model — is a prepayment model by the SIFMA (Securities Industry and Financial Markets Association) formerly known as Public Securities Association or PSA that assumes increasing prepayment rates for the first 30 months of the lifetime and constant rates… …   Wikipedia

  • PSA model — One of two standard models for describing the rate at which prepayments have been, are, or are expected to be received for mortgages and mortgage backed securities. The model assumes that borrowers are far less likely to refinance a new mortgage… …   Financial and business terms

  • Securitization — is a structured finance process, which involves pooling and repackaging of cash flow producing financial assets into securities that are then sold to investors. The name securitization is derived from the fact that the form of financial… …   Wikipedia

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