secondarymortgage.comPSA Benchmarks
Standardized prepayment speed tables aligned with SIFMA guidelines, segmented by vintage and coupon for cash flow modeling.
PSA benchmarks provide a common language for estimating prepayment behavior across securities, critical for pricing MBS and CMO tranches. The standard 100% PSA assumes gradual ramp-up to 200% CPR by month 30, but actual benchmarks often adjust by coupon tier—e.g., 3.0% issues may exhibit faster ramp-up than 5.0% issues in same-vintage pools due to refinancing incentives. Users should cross-reference with historical CPR ranges for that coupon group.
When modeling cash flows, applying the right PSA multiplier matters significantly for duration and yield estimates. A 25% PSA versus 200% PSA can shift effective maturity by years and materially affect yield-to-worst calculations. For older vintages, many loans are already beyond the initial ramp-up phase, so flat CPR assumptions may better reflect current behavior than full PSA curves.
Benchmarks also guide sensitivity analysis—especially around key rate thresholds where refinancing incentives shift. Analysts often overlay PSA curves with rate scenarios (e.g., ±100 bps) to test speed sensitivity, but must adjust for loan age and coupon characteristics that alter borrower behavior. These tests help isolate prepayment risk independent of credit factors.
