What does Defease mean?

What does Defease mean?

Definition of defeasance 1a(1) : the termination of a property interest in accordance with stipulated conditions (as in a deed) (2) : an instrument stating such conditions of limitation. b : a rendering null or void. 2 : defeat, overthrow. Synonyms Example Sentences Learn More About defeasance.

What does it mean to defease bonds?

A defeasance is a financing tool by which outstanding bonds may be retired without a bond redemption or implementing an open market buy-back. This occurs because the government securities generate the cash flow needed to pay all interest and principal on the outstanding bonds when due.

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 defeasance period?

Defeasance Period means the period beginning on the earliest permitted date determined under Section 3.10(d)(l) and ending on the 90th day before the Stated Maturity Date.

What is defeasance clause in real estate?

A defeasance clause is a term within a mortgage contract that states the property’s title (a fancy word for “ownership”) will be transferred to the borrower (mortgagor) when they satisfy payment conditions from the lender (mortgagee).

What is an extraordinary call on a muni bond?

An extraordinary redemption means the issuer can redeem the bond at par before the bond matures. Extraordinary redemption, also called extraordinary call, is most commonly exercised when bond proceeds are not spent according to schedule or a catastrophe affects the financed project.

What does pre refunded bond mean?

What Is a Pre-Refunding Bond? A pre-refunding bond is a debt security that is issued in order to fund a callable bond. With a pre-refunding bond, the issuer decides to exercise its right to buy its bonds back before the scheduled maturity date.

Can you Defease a CMBS loan?

Defeasance Allows Borrowers to Prepay Conduit Loans Many CMBS loans must be prepaid in a process called defeasance, which involves a borrower purchasing alternative securities, often U.S. Treasury bonds, to replace the collateral and interest income that the lender will lose as a result of prepayment.

What is the difference between yield maintenance and defeasance?

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 does defease mean?

verb (used with object), de·feased, de·feas·ing. to defeat or annul (a contract, deed, etc.).

What does defeased mean?

Experts define “defeased” as meaning nullified. Specifically, bond contracts often contain a defeasance clause that describes how bondholders can be assured of receiving the bond’s promised interest and payments up to a given date without causing the bond issuer to pay any prepayment penalties.

Defeasance is the process through which a borrower is released from the obligations of its debt. The borrower purchases a portfolio of government bonds as replacement collateral to secure the debt and to generate the cash flows required to meet the future obligations of the debt.

What is a defeasance loan?

A defeasance clause is a statement in a mortgage contract indicating that once the borrower has met all the obligations for the loan, the lender is required to surrender the title. Defeasance clauses are used in regions where mortgages are not offered on a lien basis.

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