What is the defeasance process?
What Is the Defeasance Process? The defeasance process is a means by which borrowers can substitute securities, typically bonds backed by the U.S. Treasury, for the existing collateral on their mortgage, such as a home or similar property. It can also be used in other kinds of financial transactions.
What is covenant defeasance?
Covenant defeasance. Covenant defeasance allows the issuer to remove the bond’s covenants by placing the remaining payments with a trustee in escrow to be paid out on schedule.
What is defeasance in a loan?
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 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 call Defeased mean?
Defeasance, more generally, is any provision in a contract that voids a bond or loan on a balance sheet when the borrower sets aside cash or other low-risk bonds sufficient enough to service the debt.
What is bond Defeasement?
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 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 happens when a bond is defeased?
In a legal context, defeasance renders the outstanding bonds paid thereby removing all obligations of the issuer for payment of the bonds.
What is a defeasance clause in a mortgage?
What is defeasance costs?
More Definitions of Defeasance Costs Defeasance Costs means the amount sufficient to defease the then-outstanding State Bonds and any costs necessary for such defeasance, plus any principal and interest payments the State has made or will make before the State Bonds are defeased.
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.
Where is a defeasance clause found?
Defeasance clauses apply only in states where the mortgage laws follow “title theory.” In states that follow either “lien theory” or “intermediate theory,” the borrower holds title to the property from the outset of the loan, although the lender may foreclose on the property if the borrower defaults.
Is Defease a word?
verb (used with object), de·feased, de·feas·ing. to defeat or annul (a contract, deed, etc.).
What is defeasance property law?
Defeasance is the process of rendering a condition in a deed or contract null and void. The contractual provision containing the condition may be referred to as a defeasance clause.
What is defeasance CMBS?
Defeasance Explained 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 deed of Recon?
A deed of reconveyance is a legal document that indicates the transfer of a property’s title from lender to borrower. The deed of reconveyance is typically issued after the borrower has paid off their mortgage in full. Some states do not use mortgages but use deeds of trust.
What is the meaning of exculpatory?
exculpatory • \ek-SKUL-puh-tor-ee\ • adjective. : tending or serving to clear from alleged fault or guilt. Examples: The DNA found at the crime scene proved to be exculpatory; it did not match that of the defendant, and so he was acquitted. “
What is malfeasance?
Intentional conduct that is wrongful or unlawful, especially by officials or public employees. Malfeasance is at a higher level of wrongdoing than nonfeasance (failure to act where there was a duty to act) or misfeasance (conduct that is lawful but inappropriate).
What is the covenant of Seisin?
Covenant of seisin-Seisin means possession, and the grantor warrants that they own the property and have the legal right to convey it. Covenant against encumbrances-The Grantor warrants that the property is free of any liens or encumbrances unless they’re specifically stated in the deed.