Tap to get financing
Apartment Loans
Fannie Mae
Fannie MaeMultifamily Small Loan ProgramFannie Mae DUS Loans
Freddie Mac
Freddie MacSmall Balance LoansAffordable Housing Express Loans
FHA/HUD
HUD LEAN Loan ProcessingHUD 232/223(a)(7) Refinancing LoansHUD 232/223(f) LoansHUD 241(a) Supplemental LoansHUD 232 LoansHUD 223(a)(7) Refinancing LoanHUD 223(f) LoansHUD 221(d)(4) LoansHUD Apartment Loans
Non-agency
Life Company Apartment LoansHard Money Apartment LoansApartment Bridge LoansMezzanine FinancingSmall Apartment LoansBank LoansConstruction LoansCMBS Loans
Learn
BlogYield Maintenance CalculatorLoan Repayment CalculatorNOI CalculatorGross Rent Multiplier CalculatorDebt Service Coverage Ratio (DSCR) CalculatorDebt Yield CalculatorCash on Cash Return CalculatorCap Rate CalculatorBreak Even Ratio CalculatorApartment Mortgage CalculatorLoan To Value and Loan To Cost RatiosApartment Finance Due Diligence ResourcesHow to Purchase an Apartment Property
About us
TeamLeadership
(561) 556-9997 Get financing →
Newly Published
Nov 1 at Apartment Loans
What is Conduit Financing?
Sep 9 at Apartment Loans
Operating Expense Ratio Explained
Jul 1 at Apartment Loans
Real Estate Mutual Funds
Explore the Janover Network
May 22 at Multifamily Loans
Multifamily Minute Reader Reflections: What's the Most Important Part of Your Financing?
May 19 at SBA 7(a) Loans
Busting 5 SBA 7(a) Loan Myths
May 19 at SBA Express Loans
Top 5 Reasons to Get an SBA Express Loan in 2023
Was This Article Helpful?
Apartment Loans Secrets
Last updated on Feb 19, 2023
3 min read
by Content Team

Pooling and Servicing Agreements Explained

In this article:
  1. What is a Pooling and Servicing Agreement?
  2. Why Are Pooling and Servicing Agreements Necessary?
  3. What Exactly Do PSAs Cover?
  4. Related Questions
  5. Get Financing
Start Your Application and Unlock the Power of Choice Experience expert guidance, competitive options, and unparalleled industry expertise.
Click Here to Get Quotes →
$5.6M offered by a Bank at 6.1%$1.2M offered by a Bank at 6.0%$2M offered by an Agency at 5.6%$1.4M offered by a Credit Union at 6.1%Click Here to Get Quotes!

What is a Pooling and Servicing Agreement?

A Pooling and Servicing Agreement. or PSA, is a legal document that contains all of the rights and responsibilities of a servicer, a trustee, and any others presiding over a pool of mortgage loans. PSAs can be standalone documents or they can be an addition to another document known as a prospectus.

If the pool of loans is publicly securitized, the PSA or prospectus documents are required to be filed with the Securities and Exchange Commission (SEC). In this case, the documents are readily available to the public through the SEC main website — though locating a specific Pooling and Servicing Agreement on the SEC website is often a difficult process. The least amount of information that is necessary to locate any specific PSA is the name of the original lender for a mortgage within the pool — and the title of the pool of loans.

Why Are Pooling and Servicing Agreements Necessary?

Pooling and servicing agreements are a necessary part of the securitization of commercial real estate loans. In general, after an investor signs a mortgage agreement and a promissory note, the loan is often pooled with other loans of similar characteristics — sometimes held in a trust — and sold on the secondary market. Mortgage investors like Fannie Mae or Freddie Mac who purchase loans on the secondary market have the option of keeping a loan in their portfolio, selling it, or packaging it as a mortgage-backed security with other loans — which can then be sold to other investors.

The PSA is crucial throughout the process, as it details the relationship between the different parties throughout the securitization process and dictates what can or cannot be done with the trust.

What Exactly Do PSAs Cover?

Pooling and service agreements are meant to outline rules and obligations for all parties involved with a pool of mortgages. Most PSAs will detail:

  • detailed instructions for how the trust is to be created
  • process for how bundled mortgage loans can be transferred into the trust
  • how securities are issued
  • rights, responsibilities, and obligations of each entity involved in the trust

To get more granular, a PSA might describe the compensation a servicer is allowed to take. In many cases, servicers are entitled to retain most fees that it collects, from late charges to assumption and nonsufficient funds (NSF) fees.

PSAs also dutifully describe the responsibilities of the loan servicer regarding payment collection, how to handle loss mitigation — some PSAs grant the authority to modify loans, for example — and the foreclosure process.

Related Questions

What is a pooling and servicing agreement?

A Pooling and Servicing Agreement (PSA) is a legal document that contains all of the rights and responsibilities of a servicer, a trustee, and any others presiding over a pool of mortgage loans. PSAs can be standalone documents or they can be an addition to another document known as a prospectus. If the pool of loans is publicly securitized, the PSA or prospectus documents are required to be filed with the Securities and Exchange Commission (SEC).

Pooling and servicing agreements are meant to outline rules and obligations for all parties involved with a pool of mortgages. Most PSAs will detail:

  • detailed instructions for how the trust is to be created
  • process for how bundled mortgage loans can be transferred into the trust
  • how securities are issued
  • rights, responsibilities, and obligations of each entity involved in the trust

To get more granular, a PSA might describe the compensation a servicer is allowed to take. In many cases, servicers are entitled to retain most fees that it collects, from late charges to assumption and nonsufficient funds (NSF) fees. PSAs also dutifully describe the responsibilities of the loan servicer regarding payment collection, how to handle loss mitigation — some PSAs grant the authority to modify loans, for example — and the foreclosure process.

What are the benefits of a pooling and servicing agreement?

Pooling and servicing agreements provide a number of benefits for CMBS loan borrowers. These agreements provide a framework for the loan servicer to collect payments, handle loss mitigation, and manage the foreclosure process. Additionally, the PSA outlines the rights, responsibilities, and obligations of each entity involved in the trust, as well as the compensation the servicer is allowed to take. This helps to ensure that all parties involved in the trust are held accountable and that the trust is managed properly.

What are the risks associated with a pooling and servicing agreement?

Pooling and servicing agreements are meant to outline rules and obligations for all parties involved with a pool of mortgages. However, there are some risks associated with PSAs. For example, restrictive pooling and servicing agreements often prevent lenders and servicers from making changes to the structure of a loan, even if it would be in the best interests of a both the borrower and the investors. Additionally, PSAs can be complex and lengthy, sometimes more than 500 pages, which can lead to confusion among borrowers.

For more information, please see the following sources:

  • Pooling and Servicing Agreements: What CMBS Borrowers Need to Know
  • Pooling and Servicing Agreements Explained

How does a pooling and servicing agreement work?

A Pooling and Servicing Agreement (PSA) is a legal document that outlines the rights and responsibilities of a servicer, a trustee, and any other parties involved in a pool of mortgage loans. The PSA will detail instructions for how the trust is to be created, how bundled mortgage loans can be transferred into the trust, how securities are issued, and the rights, responsibilities, and obligations of each entity involved in the trust. It will also describe the compensation a servicer is allowed to take, payment collection, loss mitigation, and the foreclosure process.

If the pool of loans is publicly securitized, the PSA or prospectus documents are required to be filed with the Securities and Exchange Commission (SEC). The least amount of information that is necessary to locate any specific PSA is the name of the original lender for a mortgage within the pool and the title of the pool of loans.

What are the key components of a pooling and servicing agreement?

The key components of a Pooling and Servicing Agreement (PSA) include:

  • Detailed instructions for how the trust is to be created
  • Process for how bundled mortgage loans can be transferred into the trust
  • How securities are issued
  • Rights, responsibilities, and obligations of each entity involved in the trust
  • Compensation a servicer is allowed to take
  • Responsibilities of the loan servicer regarding payment collection
  • How to handle loss mitigation
  • Foreclosure process

For more information, please see this article.

In this article:
  1. What is a Pooling and Servicing Agreement?
  2. Why Are Pooling and Servicing Agreements Necessary?
  3. What Exactly Do PSAs Cover?
  4. Related Questions
  5. Get Financing
Tags
  • PSA
  • Pooling and servicing agreement
  • Commercial Mortgage Securitization
  • CMBS
  • Loan Servicing
  • Loan Pooling
  • Secondary Mortgage Market
  • Multifamily Finance
  • Apartment Finance

Getting commercial property financing should be easy.⁠ Now it is.

Click below for a free, no obligation quote and to learn more about your loan options.

Get financing →
Janover logo

Apartment Loans is a Janover company. Please visit some of our family of sites at: Multifamily Loans, Multifamily Today, Commercial Real Estate Loans, SBA7a Loans, CMBS Loans, Apartment Loans, HUD Loans, HUD 221d4 Loan, HUD 232 Loan, HUD 223f Loan, HUD 223a7 Loan, SBA Express Loans, SBA 504 Loans, and OpportunityZones Help.

Janover Inc.

6401 Congress Ave
Ste 250
Boca Raton FL 33487
(561) 556-9997 

hello@apartment.loans

Loan Types

Bank Loans
CMBS
Construction Loans
Fannie Mae
Freddie Mac
HUD/FHA Apartment Loans
Commercial Loan Rates

Site Information

Privacy Policy
Terms of Use

This website is owned by a private company that offers business advice, information and other services related to multifamily, commercial real estate, and business financing. We have no affiliation with any government agency and are not a lender. We are a technology company that uses software and experience to bring lenders and borrowers together. By using this website, you agree to our use of cookies, our Terms of Use and our Privacy Policy. We use cookies to provide you with a great experience and to help our website run effectively.

Freddie Mac® and Optigo® are registered trademarks of Freddie Mac. Fannie Mae® is a registered trademark of Fannie Mae. We are not affiliated with the Department of Housing and Urban Development (HUD), Federal Housing Administration (FHA), Freddie Mac or Fannie Mae.

Copyright © 2023 Janover Inc. All rights reserved.