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  Encyclopedia of Keywords > Collateral > Defeasance   Michael Charnine

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    This Review contains major "Defeasance"- related terms, short phrases and links grouped together in the form of Encyclopedia article.


  1. Defeasance is a substitution of collateral.
  2. Defeasance is a complex process that is onerous for borrowers.
  3. Defeasance - A deed to defeat or invalidate another deed.
  4. DEFEASANCE is the release of a debtor from the primary obligation for a debt.
  5. Defeasance is a complex process and mistakes are easily made in negotiating terms.


  1. Defeasance may also refer to a substitution of collateral, giving the lender a similar or superior source of repayment.
  2. The cash required to purchase the defeasance portfolio usually comes from the proceeds of a refinance or sale of the property.
  3. Many conduit loans made in the '90s are now subject to defeasance as the only method to unlock equity in real estate property.
  4. The closing itself is a 3 day process where the defeasance simultaneously closes with the underlying real estate sale or refinance transaction.
  5. Defeasance - clause in mortgage that gives the borrower the right to redeem the property after default by paying the full indebtedness and fees incurred.


  1. Conversely, rising interest rates make defeasance cheaper but make interest rates higher and proceeds lower on new loans.
  2. The exact value will depend on short term interest rates over the life of the defeasance.
  3. These accrued interest amounts accumulate over time and represent the residual value of the defeasance transaction.


  1. The cost of this portfolio is the baseline for the total cost of the defeasance to the borrower.
  2. Prior to the defeasance closing, this portfolio is approved by the Certifying Accountant.


  1. That constitutes debt extinguishment, but the in-substance defeasance no longer does.
  2. Corporate finance: short for in-substance defeasance, a technique whereby a corporation discharges old, low-rate debt without repaying it prior to maturity.


  1. This estimate is subject to market risk between today and the date of your defeasance.
  2. Any borrower analyzing a sale or refinancing opportunity needs to know what the defeasance will cost.
  3. It is critical that you plan the closing on your sale or refinancing to align with the closing of the defeasance transaction.

Yield Maintenance

  1. Unlike yield maintenance, defeasance is neither a type of prepayment nor a prepayment penalty.
  2. The caveat is that if Treasury yields get close to the original coupon rate on the loan, then defeasance can be less expensive than yield maintenance.
  3. Fannie Mae's defeasance option gives the borrower a choice in lieu of yield maintenance when a property is released from the mortgage lien prior to maturity.


  1. As previously mentioned, this tactic also enables borrowers to benefit if the right to prepay the loan survives the defeasance.
  2. This document pledges the defeasance securities portfolio as collateral to secure the loan.
  3. Defeasance in a bill of sale is the putting an end to the security by realizing the goods for the benefit of the mortgagee.
  4. However, in Canada, defeasance does not release the borrower from the obligations under the mortgage loan.
  5. Each of these parties is well aware that defeasance is the only option that the borrower has to be released from the obligations of the loan.


  1. Defeasance clause - a clause in a mortgage that gives the borrower the right TP prepay a commercial mortgage by purchasing u.s.
  2. Securities transferred to Successor Borrower's defeasance account.
  3. Authorize purchase of defeasance collateral securities (day 1 of closing) 11.
  4. The defeasance provisions will dictate when and how a borrower may defease a loan.
  5. Chatham Financial has multiple methods available to quickly estimate the cost of the defeasance collateral for a defeasance.

Chatham Financial

  1. A significant factor in the defeasance of a loan is the date to which it is defeased i.e.
  2. This has significant value to the borrower and is a goal that Chatham Financial attempts to achieve in every defeasance.
  3. Loan purchasers should consider representations as to the earliest defeasance date for the loans being purchased.
  4. Chatham Financial drives the securities purchase and has never had a closing delayed due to any defeasance issue.
  5. The amount of Successor Borrower value is typically not known until the loan has fully matured and can only be estimated at the time of defeasance.


  1. A Recognisance in the nature of a Statute Staple was a strong form of bond that was normally cancelled by a separate deed, a Defeasance.
  2. In addition to these services, the Successor Borrower account is normally held at this bank once the defeasance has closed.
  3. Capital Defeasance Group charges a $8,000-$25,000 fee for its defeasance advisory services depending on the speed and complexity of the transaction.
  4. In another type of defeasance, a company instructs a broker to buy, for a fee, the outstanding portion of an old bond issue of the company.


  1. Defeasance is expensive and the process is complicated.
  2. The many parties to a defeasance can have different levels of involvement.
  3. They will charge a processing fee to cover the costs they incur in the defeasance of the loan.
  4. In short, it is somewhat similar to the original defeasance process from a legal perspective.
  5. The actual portfolio cost at the time of defeasance will depend on how efficiently the portfolio is structured.


  1. Please use our defeasance calculator for an estimate of the Successor Borrower value of your loan.
  2. Defeasance cost estimates can be obtained easily from free online calculators, like the one found at


  1. While our clients may not always see this in a favorable light, defeasance does have advantages to the Borrower.
  2. We are therefore confident in our ability to provide reasonable estimates to our clients for the defeasance of their loans.


  1. You can read more about other defeasance documents by clicking here.
  2. Defeasance documents delivered into escrow.
  3. Defeasance is subject to the terms of the loan documents and REMIC regulations.
  4. Learn more about the main defeasance documents that will be used to complete the transaction.


  1. Definition of defeasance as it relates to securitized commercial mortgages was authored by Seth Rosen of Meredith and Grew, Inc.
  2. Commercial Defeasance: Slowly but Surely As the CMBS market in Canada has matured, it has started to experience a growth in defeasance transactions.
  3. DEFEASANCE FIRST ENTERED THE CAPITAL markets in the early 1990s as a way to make the pricing on commercial mortgage-backed securities (CMBS) more attractive.


  1. Defeasance clause - A mortgage clause that states the mortgage is defeated if the accompanying note is repaid on time.
  2. The original note remains in place after a defeasance, but it is collateralized and serviced by the substituted securities instead of the real estate.


  1. If you have others, please contact us and speak with a Defeasance expert.
  2. Please call Chatham Financial to discuss these and other alternatives to defeasance.
  3. In addition, we will estimate the value that could be created by the Successor Borrower and discuss how you can receive a Defeasance Refund™ payment.


  1. Work with the Servicer's Counsel to ensure that this open period survives the defeasance process.
  2. The defeasance process can only start once the Servicer has received their deposit and retained counsel.
  3. Since the note survives a defeasance transaction, there is no termination or liquidated damage issues.
  4. The Servicer will also frequently request a deposit for Servicer's Counsel - their legal representation for the defeasance process.
  5. In brief, the defeasance process upgrades the credit of the pool that the loan is in by replacing the Borrower's credit with a risk free credit.


  1. The original note remains in place after a defeasance, but it is collateralized and serviced by the substituted securities instead of the real estate.
  2. Purchasing the securities for the defeasance collateral.
  3. Defeasance Consultants vary in their approach to purchasing securities.
  4. For a full estimate, including the securities portfolio and all fees, try our TrueQuote™Defeasance Cost Calculator.


  1. If Ratings Agencies are involved, you should allow 45 days to accommodate their need to review the details of the defeasance.

Third Party

  1. The other costs of a defeasance are the various third parties' fees and the defeasance advisor's fee.
  2. Get a customized TrueQuote™ Defeasance Cost estimate for your loan now, including all securities costs and third party fees.
  3. Capital Defeasance Group has prenegotiated the professional fees with this third party network to ensure the lowest possible costs for our clients.


  1. Due to the securitization process, there are multiple parties that become involved in the defeasance process.
  2. Transaction costs include the fees of the various parties involved in the typical defeasance transaction.


  1. In general, it usually takes 30 to 45 days to execute a defeasance.
  2. A standard defeasance closing process takes place over a period of 3 days.


  1. These waived provisions typically relate to timing, notification, roles in the defeasance and payment requirements.
  2. This is perhaps best explained by examining their roles in the defeasance process.

Legal Term

  1. Meaning of defeasance as a legal term.

Loan Documents

  1. Loan documents typically require that successor borrowers take the place of original borrowers upon defeasance.


  1. It is not strictly a defeasance, because the stipulation is in the same deed; it is really a condition in the nature of a defeasance.

Free Online English Dictionary

  1. Definition of defeasance in the Ledal Dictionary - by Free online English dictionary and encyclopedia.
  2. Definition of Legal defeasance in the Financial Dictionary - by Free online English dictionary and encyclopedia.


  1. Typically, a defeasance is coordinated to close contemporaneously with a sale or refinance.


  1. The defeasance clause is not required in states using property liens as collateral for a mortgage.
  2. Defeasance Clause - A provision in a mortgage that allows the mortgagor to have his property released from the mortgage when the secured debt is paid.
  3. A defeasance clause embodies these common-law principles that govern this type of mortgage agreement.


  1. DEFEASANCE CLAUSE: The clause in a mortgage that gives the mortgagor the right to redeem his property upon the payment of his obligations to the mortgagee.
  2. DEFEASANCE CLAUSE is the clause in a mortgage that permits the mortgagor to redeem his or her property upon the payment of the obligations to the mortgagee.


  1. Structuring the portfolio of bonds for a defeasance is a complex task.


  1. Unlike yield maintenance, defeasance is neither a type of prepayment nor a prepayment penalty.


  1. Perhaps the one provision that has the greatest impact on the overall cost of a defeasance is the type of securities that can serve as defeasance collateral.
  2. For a loan with a five year remaining term, the defeasance collateral could consist of as many as forty individual securities.
  3. Rules governing the structuring of the defeasance collateral stipulate that the earned interest cannot be applied toward scheduled loan payments.


  1. Collateral
  2. Prepayment
  3. Government Securities
  4. Municipal Bonds
  5. Glossaries > Glossary of Legal Terms /
  6. Books about "Defeasance" in

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  Originally created: March 06, 2007.
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