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Investing Glossary:
PSA Prepayment Rate
Copyright 2009,
Campbell R. Harvey. All Rights Reserved.
Do not reproduce without explicit permission.
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| Definition: |
| The Bond Market Trade Association`s Mortgaged Asset-Backed Securities Division`s prepayment model based On an assumed rate of prepayment each month of the then unpaid Principal balance of a Pool of mortgages. PSA is used primarily to derive an implied Prepayment speed of new production loans. 00% PSA assumes a prepayment rate of 2% per month in the first month following the date of issue, increasing at 2% percentage points per month thereafter until the 30th month. Thereafter, 100% PSA is the same as 6% CPR (Constant prepayment rate).
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