Securitisation glossary by Vinod Kothari
PSA Prepayment -A measure of the rate of prepayment of mortgage loans developed by the PSA. This model represents an assumed rate of prepayment each month of the then-outstanding principal balance of a pool of new mortgage loans. A 100 percent PSA assumes prepayment rates of 0.2 percent per annum of the then unpaid principal balance of mortgage loans in the first month after origination and an increase of an additional 0.2 percent per annum in each month thereafter (for example, 0.4 percent per annum in the second month) until the 30th month. Beginning in the 30th month and in each month thereafter, 100 percent PSA assumes a constant annual prepayment rate (CPR) of 6 percent. Multiples are calculated from this prepayment rate; for example, 150 percent PSA assumes annual prepayment rates will be 0.3 percent in month one, 0.6 percent in month two, reaching 9 percent in month 30, and remaining constant at 9 percent thereafter. A zero percent PSA assumes no prepayments.
Back to securitisation glossary