Promissory note. A "promissory note" is basically an IOU that contains the promise to repay the loan, as well as the terms for repayment.
Mortgage. The "mortgage" (or "deed of trust") provides security for the loan that's evidenced by the promissory note.
Securitization. In a process called "securitization," multiple loans, including both the promissory note and the mortgage, with similar characteristics are pooled, often held in a trust, and then sold in the secondary market.
How Pooling and Servicing Agreements (PSAs) Work
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:
the exact steps needed to create a trust
how bundled mortgage loans are transferred into the trust
how securities are issued, and
the duties, rights, and obligations of each party.
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 that 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.
How to Get a Copy of the Pooling and Servicing Agreement
If the securitization is public, the PSA will be filed with the Securities and Exchange Commission (SEC), and you can usually find a copy on EDGAR (Electronic Data Gathering, Analysis, and Retrieval) at www.sec.gov.
How to Find a PSA on the SEC Website
In many instances, a foreclosure will be filed in the name of the securitized trust. For example, say you're facing a judicial foreclosure, and the plaintiff in the lawsuit is "Ameriquest Mortgage Securities Inc. Asset-Backed Pass-Through Certificates, Series 2002-AR1." One way to find the PSA is to first click on "Company Filings" at the SEC's homepage. Then, enter "Ameriquest" in the "Company Name" box and hit "Search." This will bring up a list of securitized pools of loans with Ameriquest in the title. Look through the list to find the name of the trust that is listed in the foreclosure documents.
Then, click on the CIK number (the number the SEC uses to identify the filings of a company) next to the trust name. This brings up a list of the documents filed with the SEC that are associated with this trust. The PSA might be a stand-alone document, or it might be included as part of another document, like the "Prospectus."
However, not all trusts are listed with the SEC, so you might not be able to find the PSA related to your loan using this method.
When to Hire an Attorney
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 the 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.