Pooling And Servicing Agreements
what is a pooling and servicing agreement
A Pooling and Servicing Agreement (PSA) is a legal document governing the creation and administration of mortgage-backed securities (MBS). It outlines the roles and responsibilities of all parties involved.
Key Components of a PSA
The agreement details how mortgage loans are pooled together and how payments are collected and distributed to investors. It ensures transparency and legal compliance.
- Defines trustee duties
- Specifies servicing procedures
- Outlines investor rights
Importance in Securitization
PSAs are crucial for protecting investors' interests and maintaining the integrity of the securitization process. They provide a framework for managing the underlying assets.
These agreements help mitigate risks associated with mortgage defaults and ensure consistent cash flow to security holders.
Understanding PSAs is essential for participants in the structured finance market, as they govern critical aspects of asset-backed securities.