Overview of Mortgage Loan Defeasance In the context of a mortgage loan, defeasance means a substitution of collateral. Specifically, it means an exchange of the real property collateral for a securities portfolio designed to produce cashflow matching the remaining principal and interest payments on the loan, through the loan’s maturity date. The mortgage loan borrower pledges the securities portfolio to the mortgage lender, a successor entity assumes the borrower's obligations under the loan, and the lender provides a release of the mortgage lien on the borrower's real property and a release of the borrower from its continuing obligations under the loan. |
How To Select A Defeasance Advisor You're ready to give notice to your loan servicer of your intent to defease your conduit loan. The only task remaining is selecting a defeasance advisor. You have solicited proposals and have a number of possible candidates. How do you evaluate a potential advisor without actually going through the defeasance process with them? |
Understanding The Substitute Collateral Portfolio The basic description of a conduit loan defeasance transaction- a substitution of other income-producing collateral, in the form of a portfolio of U.S. government debt securities, in exchange for the release of a mortgage lien on real estate collateral- is fairly easily understood. An understanding of how such a portfolio of substitute collateral is modeled, and how it operates to pay a defeased loan over time, requires a more detailed explanation. |
Defeasance Guru Version 1.4 Defeasance Guru is a Microsoft Excel spreadsheet application containing a complete defeasance analysis package. It is a significant improvement over simple internet-based defeasance calculators, providing the capability to perform detailed analysis of defeasance scenarios and the ability to pull current defeasance portfolio pricing into other spreadsheets.
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Definition of Defeasance Wikipedia provides a definition of CMBS defeasance.
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Defeasance vs. Yield Maintenance: What's the Difference? In Real Estate Issues, Michael Schonberger and Donald M. Moliver compare defeasance provisions to yield maintenance provisions and discuss the differences between the two.
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Defeasance Provisions in Securitized Loan Documents On the website of First American Corporation, John C. Murray provides an in-depth description of standard defeasance provisions.
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How to Defease a Loan on Schedule and Avoid Future Liability In the California Real Estate Journal, Karla N. MacCary discusses steps that a borrower should take to ensure that its defeasance goes smoothly.
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Prepayment Disincentives in Securitized Commercial Loans In Probate and Property, the journal of the ABA Real Property, Probate and Trust Law Section, George Lefcoe discusses the rationale behind defeasance requirements and other restrictions on loan prepayment.
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Defeasance: Now a Viable Option in New York State At Joshua Stein's website, www.real-estate-law.com, Mr. Stein describes the mechanics of a New York-style defeasance, a transaction structure designed to save on mortgage recording taxes in New York and other states with similar tax structures. Defeasance Management LLC will work with your servicer to determine if a New York-style defeasance is appropriate for your transaction.
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Strong Price Appreciation Drives Once Rare Event: Defeasance of CMBS Conduit Loans Becomes Common Place Costar Group takes note of the recent surge in defeasance activity.
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CMBS Defeasance Rate More Than Doubled Since Last Year Commercial Property News discusses the increase in defeasance activity from 2004 to 2005.
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Why The Checkout Line to Defease is Lengthening National Real Estate Investor discusses the growing demand for mortgage loan defeasances.
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