Glossary

Pooling and Servicing Agreement (PSA)

Also known as: PSA

The master governing contract for a CMBS securitization, establishing the trust, defining the rights and obligations of the trustee, master servicer, and special servicer, and setting the waterfall rules for distributing collateral cash flow to certificateholders.

The PSA is the legal architecture underlying every CMBS deal, specifying servicing standards, advancing obligations, controlling class and directing certificateholder rights, the process for special servicer replacement, and the priority of payments among certificate classes in both normal operation and default scenarios. CRE professionals reference the PSA when analyzing a specific loan's flexibility — for example, whether a borrower has the contractual right to defease, substitute collateral, or obtain lender consent to a lease without special servicer involvement — since these permitted actions are defined loan-by-loan in the PSA's loan-level provisions and mortgage loan schedule rather than in the individual note. Because PSAs run hundreds of pages and are filed publicly for registered CMBS deals, they are a primary due diligence source for investors and workout counsel assessing a bondholder's rights on a distressed asset.