Defeasance is a financial transaction that allows the Borrower to effectively prepay a conduit loan by substituting collateral for the Borrower’s real estate property. This substitution of collateral allows the Borrower to obtain a release of the mortgage’s lien on the property so that the Borrower has clear title in connection with a sale or refinancing.
Defeasance was introduced in the late 1990s as an alternative to yield maintenance and other forms of prepayment penalty for conduit loans. Today defeasance is the only way to prepay nearly all conduit loans issued in the last few years. (Learn more about the History of Defeasance)
The defeasance itself is a complex process involving many parties. Capital Defeasance Group quarterbacks the process for borrowers who partner with us. We make the complex simple and your defeasance effortless.
Due to the complexity and process intensity of a defeasance, borrowers should use a defeasance advisor to guide the transaction process and to structure and purchase the lowest cost substitute collateral securities portfolio. Capital Defeasance Group acts as the Borrower’s independent advocate to ensure the transaction is closed on time at the lowest possible cost. Importantly, we also offer the Borrower a Defeasance Refund™ payment to share the residual value created by the substituted securities portfolio. (Read more on our commitment to Sharing the Defeasance Refund™ payment and the defeasance residual value)
Capital Defeasance Group works closely with the Borrower’s team to coordinate all of the third parties to the defeasance transaction, including the Servicer, Servicer’s Counsel, other attorneys, rating agencies, the accountant, the Securities Intermediary, and the Title Company. (Learn more about Parties to a Defeasance)
We use sophisticated proprietary algorithms and capital markets relationships to optimally design and purchase the lowest cost portfolio of securities as the substitute collateral. We coordinate the formation of the Successor Borrower who will assume the Borrower’s loan obligations, obtain the necessary Successor Borrower opinions, and guide all parties through the process to a timely transaction closing. (Find out How We Assist Borrowers.)
Capital Defeasance Group helps borrowers prepay their conduit loans. We work with you as the borrower’s independent advocate throughout the defeasance process, offering reliable closings, guaranteed lowest cost portfolios and returning cashback through the Defeasance Refund™. Our team has extensive experience with defeasance and with acquiring, operating and selling commercial real estate, so we know your transaction. Contact us to see why we should be Your Defeasance Partner™.