A pooling and servicing agreement is a formal document prepared in the field of finance. This document is usually prepared when servicing is provided to a pooled loan. The agreement states the process in which the loan is serviced. The loan that is serviced in a pooling and servicing agreement is a collections of loans gathered into a securitized pool. The usual purpose of investing in a securitized loan is to create diversity in property types, sizes and markets.
The parties usually involved in a pooling and servicing agreement are:
- The originator of the loan who is also known as the primary servicer
- An individual responsible for subcontracting duties to the primary servicer. This individual is known as the master servicer.
- A special servicer who takes the responsibility of administration of the loan in case of a default
- A trustee that holds loan documents and also distributes payments
- An agency that monitors the performance of the pool
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