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 Public Securities Association Standard Prepayment model (PSA) 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 model, called "100 percent PSA," starts with an annualized prepayment rate of 0% in month zero, with 0.2% increases each month until peaking at 6% after 30 months.
Also called "PSA prepayment model."
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