Public Securities Association Standard Prepayment Model

Public Securities Association Standard Prepayment Model

One of several ways to calculate changes to the prepayment rate on a mortgage-backed security. The PSA model assumes that the prepayment rate will increase 0.2% per month for the first 30 months of the life of the MBS. Obviously, this will change the expected yield of the security. If prepayment rate changes at a different pace, the PSA model expresses this as a percentage of the 0.2%. For example, a change of 0.2% is 100%, while a change of 0.4% is 200%.