The Pooling and Servicing Agreement is NOT a Trust Agreement

Admissions in Court Can Trap Homeowners

One of the most important—and least understood—facts about litigation is this: admitting an allegation, implied allegation, or even an argument in court makes it legally “true” even if it has no basis in reality.

That’s why homeowners often lose cases unnecessarily. By admitting that a servicer is legitimate or that a PSA is a trust agreement, they hand the other side an advantage that can’t easily be undone.

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The PSA Is Not a Trust Agreement

When investment banks finally admitted they were using trust names and trustees (after denying it for years), they began offering Pooling and Servicing Agreements (PSAs) as proof of legitimacy.

The problem? A PSA is not a trust agreement.

• A trust agreement is a legally binding statement of present intent, establishing a trust under state law with a trustee holding assets for beneficiaries.

• A PSA is a forward-looking document—often unsigned, incomplete, and filled with conditional language about what might happen in the future.

• PSAs contain no warranties of title and no record of actual conveyances of assets.

Banks pass PSAs off as trust agreements because they know courts and lawyers often won’t dig deep enough to spot the difference.

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State Laws on Trust Creation

Trust law varies by state, but one universal principle applies: a trust must hold an asset (“res”) to exist.

• Some states allow “sleeping” or inchoate trusts to be created without assets.

• Others require conveyance of property into the trust at inception.

• In all states, without conveyance of an actual obligation, the trust cannot assert claims.

This distinction is critical in foreclosure litigation. If no loan obligation was ever conveyed, the trustee and the trust have no claim.

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What Must Be Conveyed?

The banks argue that only a note or assignment of mortgage needs to be conveyed. But case law and statutes are clear:

• The entire loan must be conveyed—which includes the underlying obligation.

• No REMIC trust has ever shown proof of owning an underlying obligation or receiving payments from it.

• That’s because in securitization, the debt is avoided or eliminated and replaced by a “virtual obligation” the homeowner never agreed to.

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The Role of the Servicer: A Smokescreen

Because the trust doesn’t actually own the obligation, a third-party servicer is designated to act as if it does.

• Servicers hide the fact that no creditor is receiving payments.

• No disbursements go to the REMIC trust or trustee.

• Homeowners unknowingly validate this setup by treating the servicer as real.

In truth, servicers exist to mask the absence of a creditor and a loan account receivable.

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The Homeowner’s Hidden Service to Wall Street

Here’s what really happens in securitization:

• At closings and refinances, homeowners are led to believe money changed hands—even when it didn’t.

• Homeowners assume the “loan” is legitimate and payable, even though no lender, loan account, or receivable exists.

• Their signatures and obligations fuel a securities machine that generates massive profits for Wall Street.

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The Danger of Admitting Falsehoods

The fatal mistake comes when homeowners admit, directly or indirectly, that:

• The PSA is a trust agreement

• The company is a legitimate servicer

Once those admissions are on the record, judges are bound to accept them. Homeowners then find themselves trapped by their own words, even if the underlying claim is fraudulent.

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Key Takeaway

The PSA is not a trust agreement, and servicers don’t service real loan accounts. Homeowners must be careful not to concede these points in litigation. Success in foreclosure defense depends not on reinforcing the banks’ false narrative but on challenging it at its core.

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⚖️ Disclaimer: This article is for educational purposes only and does not constitute legal advice. Always consult with a qualified attorney about your specific case.

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