What is PSA Prepayment Model?
The PSA (Public Securities Association, now SIFMA) prepayment model is a standardized benchmark for expressing prepayment speeds. At 100% PSA, prepayment ramps linearly from 0% CPR at month 0 to 6% CPR at month 30, then stays flat at 6% for the remaining life. Speeds are expressed as multiples: 200% PSA means twice the standard speed (ramp to 12% CPR), 50% PSA means half (ramp to 3% CPR). PSA is primarily used for agency MBS but serves as a communication shorthand in whole loan markets.
Formula
At 100% PSA: Month 1-30: CPR = 0.2% × month number Month 31+: CPR = 6.0% At N% PSA: Multiply all CPR values by N/100
How LoanBook Uses PSA Prepayment Model
LoanBook accepts PSA speed inputs and converts them to CPR for cashflow projections. However, the LoanBook Prepay Model generates more accurate sector-specific prepayment projections using S-curve refinancing models, so PSA is primarily used as a communication convention rather than an analytical input.
Frequently Asked Questions
Is PSA used for whole loans?
PSA is occasionally referenced in whole loan markets as a shorthand, but most whole loan traders quote CPR directly because PSA was designed for agency MBS with 30-year terms. Whole loans span many asset classes with different prepayment profiles.
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