Is defeased a word?
verb (used with object), de·feased, de·feas·ing. to defeat or annul (a contract, deed, etc.).
How long does it take to defease a loan?
Understanding Defeasance A defeasance guarantees that the loan payments will continue to be met, even after the property is released. Defeasance transactions generally close within 20 to 35 days from start to finish, but they can be completed in as little as a week if a borrower is on a tight schedule.
What does defeased mean for bonds?
General Description. A defeasance is a financing tool by which outstanding bonds may be retired without a bond redemption or implementing an open market buy-back. Cash is used to purchase government securities.
What does it mean when a loan is defeased?
Defeasance is a provision in a contract that voids a bond or loan on a balance sheet when the borrower sets aside cash or bonds sufficient enough to service the debt.
What is a defeasance payoff?
With defeasance, the debt obligation does not go away, but the defeasance process releases the mortgaged property’s title to the borrower. That allows the borrower to refinance or sell the property before the loan has been fully paid off.
What is yield maintenance?
Yield maintenance is the actual prepayment of the loan. A prepayment penalty – this is typically determined by calculating the present value of the remaining loan payments, with a discount factor equal to the current yield on the U.S. Treasury that matures closest to the loan’s maturity date.
What is defeasance penalty?
In some cases, the borrower will be required to pay the entire remaining interest on the note at the time that the debt is repaid. However, in many instances, the terms of the loan will call for a defeasance, which is effectively a prepayment penalty, but that can offer some flexibility to the borrower.
Who is a successor borrower?
Summary. A successor borrower is an entity that takes on the payment responsibilities of the original borrower after a commercial real estate (CRE) loan has been defeased, often giving rise to “residual value” by virtue of the nature of the securities portfolio as compared with the loan being prepaid.
What is coterminous debt?
What Does Coterminous Mean? Coterminous loans refers to a supplemental loan with a maturity date that is the same as a senior debt, or an original loan. Coterminous is most often used to describe mortgage loans, such as those for residential and commercial borrowers.
What is overlapping debt?
Overlapping debt refers to the financial obligations of one political jurisdiction that also falls partly on a nearby jurisdiction. Overlapping debt is common in the U.S. because most states are divided into numerous jurisdictions for different tax purposes, such as building a new public school or building a new road.
What does defeased mean in CMBS?
Most often used in commercial real estate as the prepayment penalty on conduit/CMBS loans, defeasance is the process of releasing a commercial property from the lien of the mortgage and replacing it with a portfolio of U.S. government securities.
What is a loan reconveyance?
In that context, reconveyance refers to the transfer of title to real estate from a creditor to the debtor when a loan secured by the property—i.e. mostly likely a mortgage with the property as collateral—is paid off.
How does a defeasance work?
Defeasance, as its name suggests, is a method for reducing the fees required when a borrower decides to prepay a fixed-rate commercial real estate loan. Instead of paying cash to the lender, the defeasance option allows the borrower to exchange another cash-flowing asset for the original collateral on the loan.
What is a defeasance transaction?
In a defeasance transaction, a borrower substitutes new collateral in exchange for the lender’s release of the old collateral.
Why is debt yield important?
Debt yield is of high importance to lenders, as it helps them to understand how long it would take for them to recoup their investment in the event of having to take possession of a property after a loan default.
What is the difference between defeasance and yield maintenance?
Yield maintenance is the actual prepayment of the loan, while defeasance entails a substitution of collateral and a legal assumption of the loan by the successor borrower. A yield maintenance prepayment has two components: the unpaid principal balance of the loan and a prepayment penalty.
What is difference between yield maintenance and defeasance?
What rights does a successor in interest have?
This means any confirmed successor in interest is entitled to submit notices of error, requests for information, and requests for a payoff statement with respect to the mortgage loan account.
How do you prove successor in interest?
These forms should include:
- Acknowledgement that the bank received the request.
- A written description of the documents the bank requires confirming the person’s identity and ownership interest, which also provides contact information, including a telephone number.
- Notice of Confirmed Successor in Interest.