The Defeasance Process
3 Day Closing Process
A defeasance transactions closes over three days because of the purchase and settlement of the defeasance collateral securities. The three-day closing encompasses a securities purchase day, a funding/delivery day and the final closing day where the defeasance closes simultaneously with the underlying real estate transaction.
Purchase (“Circle”) Day
- Servicer counsel confirms receipt of executed defeasance documents
- Servicer counsel confirms receipt and approval of all borrower documents
- Capital Defeasance Group models final portfolio of securities and provides list to Accountants for final approval
- Capital Defeasance Group verifies that sale/refinance funding is imminent
- Borrower authorizes Capital Defeasance Group to purchase the securities portfolio Securities purchased through a competitive process to ensure best possible pricing
- Servicer Counsel overnights all original release documents required for closing to the Title Company
Delivery/Funding Day
- Servicer Counsel distributes final closing instructions to borrower and Title Company for execution
- Title Company confirms receipt of original release documents
- Securities broker confirms delivery of all securities (i.e. no failed deliveries)
- Title Company verifies that funds have been wired into escrow
- Any and all remaining issues are resolved by end of day so Servicer Counsel and Title Company can proceed with closing
Closing Day
- Capital Defeasance Group transfers securities from broker/dealer to Securities Intermediary (into custodial account)
- Securities Intermediary confirms receipt of securities and inform working parties and Servicer Counsel via email
- Servicer Counsel instructs Title Company to disburse funds to Securities Intermediary for securities settlement.
- Securities Intermediary confirms receipt of funds via email to working party and Title Company
- Servicer Counsel instructs Title Company to finalize Closing
- Title Company closes escrow/records/disburses all remaining funds
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