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

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

View Full Document Right Arrow Icon
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
Background image of page 1

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

View Full DocumentRight Arrow Icon
Image of page 2
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 Right Arrow Icon
Ask a homework question - tutors are online