Public Securities Association model (100% PSA)
Asset-Backed Securities glossary · Collateral & Cash Flow Modeling
Definition
A prepayment convention ramping from 0.2% CPR at month 1 to 6% CPR at month 30, then constant thereafter. Distinct from the 'Pooling and Servicing Agreement (PSA)' legal document — both abbreviate to PSA but mean different things.
Public Securities Association model (100% PSA) in plain English
When you bundle thousands of loans, you can't know exactly how fast people will pay them off early, so the industry agreed on a shared 'ruler' to compare deals: the 100% PSA model. It assumes early payoffs start tiny and speed up over the loan's first two and a half years — beginning at 0.2% per year (CPR, the annual rate at which the pool prepays), climbing steadily to 6% by month 30, then holding flat. It's not a prediction so much as a common yardstick, so when someone says a deal runs at '150% PSA,' everyone knows they mean 1.5 times that standard speed. (Confusingly, 'PSA' also names a legal contract in these deals — same letters, totally different thing.)
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