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==Defeasance of Commercial Mortgage Loans==
===Defeasance of a Securitized Commercial Mortgage Loan===
'''Defeasance''' of a securitized commercial mortgage is a process in commercial [[real estate]] finance by which a [[borrower]] substitutes other income-producing collateral for a piece of real property to facilitate the removal (defeat) of an existing lien (entailment of the property) without paying-off (through a transfer of liquid asset(contracted; show full) to make the monthly debt service payments and [[balloon payment]] on the mortgage being defeased. The premium a borrower pays to defease (what some refer to incorrectly as a “penalty”) is the total cost of purchasing the securities less the outstanding balance on the loan. Payments to [[Commercial mortgage-backed security]] [[Investment bond|bondholders]] are not disrupted, and the borrower can sell or place a new [[first lien]] on the property. Unlike yield maintenance, defeasance is neither a type of [[
Prepayment of loan|prepayment]] nor a [[prepayment penalty]].
	 
This type of defeasance is a relatively new methodology. Looking back to the mid-1990s, it was unheard of to defease a securitized commercial mortgage. Securitized lenders (colloquially known as “conduits”) focused primarily on the securitization of residential mortgages, while commercial mortgage debt was still the bastion of large [[life insurance]] companies and [[commercial bank]]s. But times quickly changed, and at the end of 1996, there was an explosion in(contracted; show full)*[http://www.defeasancemanagement.com Defeasance Management ]
*[http://www.defeasewithease.com Commercial Defeasance "Defease With Ease" ]
*[http://www.chathamdefeasance.com Chatham Financial ]

[[Category:Legal terms]]
[[Category:Property law]]

[[fr:Défaisance]]