KIC000019

# KIC000019 - Prepayment Conventions and Cash Flow(continued o Prepayment Benchmark PSA TIle F'1lblic S"1cfw_rilies Associouon(PSA prepayment

This preview shows pages 1–2. Sign up to view the full content.

Prepayment Conventions and Cash Flow (continued) o PSA Prepayment Benchmark TIle F'1lblic S(!("1{rilies Associouon (PSA) prepayment benchmark is expressed as a monthly series of annual prepayment rates. The PSA benchmark assumes that prepayment rates are low for newly originated mortgages and then will speed up with seasorung . The PSA benchmark assumes the following CPR~ for Ju-year mortgages: a CPR of 0.2% for the first month, increased by 0.2% per year per month for the nelCl30 months when il reaches 6% per year ii. a 6% CPR for the. remaining yeers The benchmark, referred to as "IOD% rSA" or simply "100 PSA," is depicted graphically in Exhibit 1 1_6 (see Overhead ) J -15) Prepayment Conventions and Cash Flow (continued) o PSA Prepayment Benchmark Mathematically, J 00 PSA can be expressed as follows: 1[1\$30: CPR 0= 6% (t/30) 1ft> 30: CPR=6% where t is the number ofmamhs since tile mortgage originated Slower or faster speeds are then referred to as some percentage ofPSA For example, 150

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

## This note was uploaded on 09/06/2011 for the course FIN 428 taught by Professor Hood during the Fall '11 term at Iowa State.

### Page1 / 2

KIC000019 - Prepayment Conventions and Cash Flow(continued o Prepayment Benchmark PSA TIle F'1lblic S"1cfw_rilies Associouon(PSA prepayment

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online