Asked by: Raydel Niekel
Asked in category: personal finance, mutual funds
Last Updated: 23rd Jul 2024

What is a CMO PSA and what does it mean?

PSA prepayment speeds - Investment & Finance Definition
The Bond Market Association has developed a measure that measures the rate at which mortgage loans are prepaid. This model is an assumption of monthly prepayment of the principal balance remaining in a pool of mortgages.

So, what is PSA for mortgages?

This is the Public Securities Association Standard prepayment model ( PSA ) that assumes a monthly rate of prepayment equal to the principal balance of a mortgage loan.

A CMO is also a bond. The collateralized mortgage obligation ( CMO ) is a form of complex debt security that directs principal and interest payments from a collateral pool to various types and maturities.

What is the difference between MBS and CMO?

A collateralized mortgage obligation (or CMO) is a type MBS that bundles mortgages together and sells them as one investment. It is ordered by maturity and risk level. An MBS (mortgage-backed security) is a type of asset-backed security which represents the interest earned on a group of mortgage loans.

What is a Vadm CMO and how do you define it?

A VADM is a CMO that makes payments using the accrued interest from a Z bond. Because Z-bonds are the last to repay the principal, the VADM protects investors from the risk of prepayment.