A "pooling and servicing agreement" (PSA) is a legal document that lays out the rights and obligations of specific parties over a pool (group) of securitized mortgage loans.
If your loan servicer denies your request for a loan modification or another loss mitigation option based on "investor guidelines," the servicer might be referring to the PSA.
To understand PSAs, you must first understand basic mortgage transactions and the securitization process.
Most people who take out a home loan sign a promissory note and a mortgage (or deed of trust).
In a process called "securitization," multiple loans, including the promissory note and the mortgage, with similar characteristics are pooled, often held in a trust, and then sold in the secondary market.
A borrower typically gets a home loan directly from a bank or mortgage company. However, the original lender won't hold on to the loan in most cases. Instead, the lender sells the loan to a mortgage investor, like Fannie Mae, Freddie Mac, or a private entity, on what's commonly known as the "secondary mortgage market."
After purchasing a loan from a bank or mortgage company, subject to some restrictions, the mortgage investor can keep the loan in its portfolio, sell it, or package it with other loans into mortgage-backed securities, which are then sold to other investors
The PSA is the contract that governs the relationship between the various parties in the securitization process and controls what can and can't be done with the trust. The PSA will say, among other things:
For instance, the PSA might describe the servicer's compensation. Often, a servicer is entitled to retain the late charges, nonsufficient funds (NSF) fees, reconveyance fees, assumption fees, and other fees it collects.
The PSA will likely also carefully describe the loan servicer's responsibilities about collecting payments, handling loss mitigation (including the authority to modify loans), and foreclosure.
Again, if your loan servicer denies your request for a loan modification or another foreclosure alternative based on "investor guidelines," the servicer might be referring to what the PSA allows. If you think you were wrongfully denied a loss mitigation option, ask your foreclosure lawyer to get a copy of the PSA and review it for these guidelines.
Your lawyer should also know how to read loan servicing communication logs and payment histories. These documents contain information about how and when the servicer reviewed your loss mitigation application.
If the securitization is public, the PSA will be filed with the Securities and Exchange Commission (SEC). You can usually find a copy on EDGAR (Electronic Data Gathering, Analysis, and Retrieval) at www.sec.gov.
However, not all trusts are listed with the SEC, so you might be unable to find the PSA related to your loan using this method. In that case, you might try making a qualified written request to get a copy of the PSA. Or your attorney may request a copy of the PSA as part of discovery if you fight the foreclosure in court.
PSAs are very complicated and can be hundreds of pages long. If you're facing a foreclosure and your loan has been securitized, consider talking to an attorney to help you understand the intricacies and issues surrounding securitization as it pertains to your individual situation.
A foreclosure attorney can also explain different options that might be available to prevent a foreclosure and can tell you if you have any defenses to the foreclosure.