Pooling and Servicing Agreement - What is a PSA
Definition of PSA for Mortgage Loans
A PSA is an acronym for Pooling and Servicing Agreement. This is a contract that is created when mortgage loans are bundled into a mortgage-based security and sold to investors. The security is now the owner of the mortgages included in the bundle. A homeowner may want to find the PSA in which their loan has been bundled, especially during foreclosure proceedings.
How Mortgage Loans are Securitized and a PSA Created
Many mortgage loans are securitized. You may not realize your loan has been sold off in this way. The loan originator, such as the bank or mortgage lender, gathers hundreds of loans into one package. That is the pooling part of the PSA acronym. The originator often bundles loans of a similar type and quality. Your loan is now part of a pool and will become a securitized mortgage loan.
The pool of mortgages becomes a marketable security or mortgage-backed security and is sold on the secondary market. Often the purchaser is a trust. Trusts are comprised of investors, who will receive payments from the trust. Just as your mortgage interest went originally to the bank, now it goes to the trust and will become part of the payment to the investors in the security.
After the loans are pooled and sold, the trust hires a service provider to collect monthly payments and distribute that money to the investors. That securitization agreement is called a pooling and servicing agreement or PSA. The pooling and servicing agreement is filed with the Security and Exchange Commission (SEC), providing the securitization was public.
The PSA controls what can and can't be done with the trust. It spells out the rights, duties and obligations of all of the parties involved. It determines how the servicer is paid and where fees paid on the mortgages will go. Importantly for the homeowner, it also spells out how payments are collected, how mortgage loans may be modified and the process of foreclosure.
Finding Your Pooling and Servicing Agreement
Homeowners whose loans are securitized and who are facing foreclosure or who want a loan modification may benefit from finding their Pooling and Servicing Agreement. It may be part of a prospectus rather than a stand-alone document. If the securitization was public, you can find the documents on the www.sec.gov website.
To find your PSA, you will need the name of the original lender and the title of the pool of loans. Finding the title takes some detective work on the SEC website. You can find the name of your lender and the date on your promissory note and deed of trust. The date the loan was made is useful in finding your PSA on the SEC website. Search by the name of the lender and find documents filed in the year of your loan. Find the PSA, prospectus and prospectus supplement.
Once you have found the documents, note their document number and names and save or bookmark them. You can contact the SEC to obtain a certified copy. You may need a lawyer to help analyze it.
PSA and Short Sales
When the parties to a short sale cannot understand why the bank would prefer to do a foreclosure over granting a short sale, much of the time the answer can be found in the terms and conditions of the PSA. Sometimes it is far more profitable to foreclose because the PSA picks up the fees involved with the foreclosure itself.
At the time of writing, Elizabeth Weintraub, CalBRE #00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.