Definition of PSA

PSA

A prepayment model based on an assumed rate of prepayment each month of the then unpaid principal
balance of a pool of mortgages. psa is used primarily to derive an implied prepayment speed of new
production loans, a 100% psa assumes a prepayment rate of 2% per month in the first month following the
date of issue, increasing at 2% per month thereafter until the 30th month. Thereafter, 100% psa is the same as
6% CPR.

Public Securities Administration (PSA)

The trade association for primary dealers in U.S. government
securities, including MBSs.

48-hour rule

The requirement that all pool information, as specified under the psa Uniform Practices, in a
TBA transaction be communicated by the seller to the buyer before 3 p.m. EST on the business day 48-hours
prior to the agreed upon trade date.

Good delivery and settlement procedures

Refers to psa Uniform Practices such as cutoff times on delivery
of securities and notification, allocation, and proper endorsement.

Administrative pricing rules

IRS rules used to allocate income on export sales to a foreign sales corporation.

Basic IRR rule

Accept the project if IRR is greater than the discount rate; reject the project is lower than the
discount rate.

Book-entry securities

The Treasury and federal agencies are moving to a book-entry system in which securities are not represented by engraved pieces of paper but are maintained in computerized records at the
Fed in the names of member banks, which in turn keep records of the securities they own as well as those they
are holding for customers. In the case of other securities where a book-entry has developed, engraved
securities do exist somewhere in quite a few cases. These securities do not move from holder to holder but are
usually kept in a central clearinghouse or by another agent.

Debt securities

IOUs created through loan-type transactions - commercial paper, bank CDs, bills, bonds, and
other instruments.

Discount securities

Non-interest-bearing money market instruments that are issued at a discount and
redeemed at maturity for full face value, e.g. U.S. Treasury bills.

Discounted payback period rule

An investment decision rule in which the cash flows are discounted at an
interest rate and the payback rule is applied on these discounted cash flows.

Exempt securities

Instruments exempt from the registration requirements of the securities Act of 1933 or the
margin requirements of the SEC Act of 1934. Such securities include government bonds, agencies, munis,
commercial paper, and private placements.

Federal agency securities

securities issued by corporations and agencies created by the U.S. government,
such as the Federal Home Loan Bank Board and Ginnie Mae.

Government securities

Negotiable U.S. Treasury securities.

Initial public offering (IPO)

A company's first sale of stock to the public. securities offered in an IPO are
often, but not always, those of young, small companies seeking outside equity capital and a public market for
their stock. Investors purchasing stock in IPOs generally must be prepared to accept very large risks for the
possibility of large gains. IPO's by investment companies (closed-end funds) usually contain underwriting
fees which represent a load to buyers.

Manufactured housing securities (MHSs)

Loans on manufactured homes - that is, factory-built or
prefabricated housing, including mobile homes.

Mortgage-Backed Securities Clearing Corporation

A wholly owned subsidiary of the Midwest Stock
Exchange that operates a clearing service for the comparison, netting, and margining of agency-guaranteed
MBSs transacted for forward delivery.

Mortgage-backed securities

securities backed by a pool of mortgage loans.

Multirule system

A technical trading strategy that combines mechanical rules, such as the CRISMA
(cumulative volume, relative strength, moving average) Trading System of Pruitt and White.

Net present value rule

An investment is worth making if it has a positive NPV. Projects with negative NPVs
should be rejected.

Pass-through securities

A pool of fixed-income securities backed by a package of assets (i.e. mortgages)
where the holder receives the principal and interest payments. Related: mortgage pass-through security

Project loan securities

securities backed by a variety of FHA-insured loan types - primarily multi-family
apartment buildings, hospitals, and nursing homes.

Public offering

The sale of registered securities by the issuer (or the underwriters acting in the interests of the
issuer) in the public market. Also called public issue.

Public warehouse

Warehouse operated by an independent warehouse company on its own premises.

Publicly traded assets

Assets that can be traded in a public market, such as the stock market.

Rule 144a

SEC rule allowing qualified institutional buyers to buy and trade unregistered securities.

Rule 415

rule enacted in 1982 that permits firms to file shelf registration statements.

Section 482

United States Department of Treasury regulations governing transfer prices.

Securities & Exchange Commission

The SEC is a federal agency that regulates the U.S.financial markets.

Securities analysts

Related:financial analysts

Stripped mortgage-backed securities (SMBSs)

securities that redistribute the cash flows from the
underlying generic MBS collateral into the principal and interest components of the MBS to enhance their use
in meeting special needs of investors.

Tick-test rules

SEC-imposed restrictions on when a short sale may be executed, intended to prevent investors
from destabilizing the price of a stock when the market price is falling. A short sale can be made only when either
1) the sale price of the particular stock is higher than the last trade price (referred to as an uptick trade) or
2) if there is no change in the last trade price of the particular stock, the previous trade price must be
higher than the trade price that preceded it (referred to as a zero uptick).

Treasury securities

securities issued by the U.S. Department of the Treasury.

Triple witching hour

The four times a year that the S&P futures contract expires at the same time as the S&P
100 index option contract and option contracts on individual stocks.

Variance rule

Specifies the permitted minimum or maximum quantity of securities that can be delivered to
satisfy a TBA trade. For Ginnie Mae, Fannie Mae, and Feddie Mac pass-through securities, the accepted
variance is plus or minus 2.499999 percent per million of the par value of the TBA quantity.

Securities and Exchange Commission (SEC)

The federal agency that
oversees the issuance of and trading in securities of public businesses.
The SEC has broad powers and can suspend the trading in securities of a
business. The SEC also has primary jurisdiction in making accounting
and financial reporting rules, but over the years it has largely deferred to
the private sector for the development of generally accepted accounting
principles (GAAP).

Go public

The process of offering a company’s shares for sale to the public through an
initial public offering.

Public offering

The sale of new securities to the investing public.

initial public offering (IPO)

First offering of stock to the general public.

Securities and Exchange Commission (SEC)

Federal agency responsible for regulation of securities markets in the United
States.

Monetarist Rule

Proposal that the money supply be increased at a steady rate equal approximately to the real rate of growth of the economy. Contrast with discretionary policy.

Policy Rule

A formula for determining policy. Contrast with discretionary policy.

Public Debt

See national debt.

Publicly Held National Debt

See national debt.

Rule

See monetarist rule.

Rules-versus-Discretion Debate

Argument about whether policy authorities should be allowed to undertake discretionary policy action as they see fit or should be replaced by robots programmed to set policy by following specific formulas. See discretionary policy, policy rule.

Securities

A general term for stock, bonds, or other other financial assets.

Contract Work Hours and Safety Standards Act

A federal Act requiring federal contractors to pay overtime for hours worked exceeding 40 per week.

Hourly Rate Plan

A method for calculating wages for hourly employees that involves
the multiplication of the wage rate per hour times the number of hours
worked during the work week.

Walsh-Healey Public Contracts Act of 1936

A federal Act that forces government contractors to comply with the government’s minimum wage and hour rules.

Public Oversight Board

An independent private-sector body that oversees the audit practices
of certified public accountants who work with SEC-regulated companies.

Securities and Exchange Commission (SEC)

A federal agency that administers securities legislation,
including the securities Acts of 1933 and 1934. public companies in the United States
must register their securities with the SEC and file with the agency quarterly and annual financial
reports.

Attribution Rules

Legislation under which interest, dividends, or capital gains earned on assets you transfer to your spouse will be treated as your own for tax purposes. Interest or dividends relating to property transferred to children under 18 also will be attributed back to you. The exception to this rule is that capital gains relating to property transferred to children under 18 will not be attributed back to you.

Rule of 72

This is a very important rule to know. The rule is that the number 72 divided by the rate of return of your investment equals the number of years it takes for your investment to double.
For example
* At 1% your money will double in 72 years.
* At 2% your money will double in 36 years.
* At 3% your money will double in 24 years.
* At 4% your money will double in 18 years.
* At 5% your money will double in 14.4 years.
* At 6% your money will double in 12 years.
* At 7% your money will double in 10.3 years.
* At 8% your money will double in 9 years.
* At 9% your money will double in 8 years.
* At 10% your money will double in 7.2 years.

Asset-Backed Securities

Bond or note secured by assets of company.

Initial Public Offering

A firms first offering of its shares to the investment public, after registration requirements of the various securities regulators have been met.

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