What is a defeased loan?
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 a defeased municipal bond?
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.
Is defeased a word?
verb (used with object), de·feased, de·feas·ing. to defeat or annul (a contract, deed, etc.).
What is the equitable right of redemption?
Equity of redemption (also termed right of redemption or equitable right of redemption) is a defaulting mortgagor’s right to prevent foreclosure proceedings on the property and redeem the mortgaged property by discharging the debt secured by the mortgage within a reasonable amount of time (thereby curing the default).
What is a blanket mortgage in real estate?
A blanket mortgage, often called a blanket loan, is a type of mortgage that finances multiple real estate properties at the same time. Popular among real estate investors, developers and owners of commercial property, blanket loans can make the lending process more efficient and cost effective.
What is an extraordinary call?
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 it mean when a bond is refunded?
Understanding Refunded Bond By definition, the term “refunding” means refinancing another debt obligation. It is not unheard of for municipalities to issue new bonds in order to raise funds to retire existing bonds. The bonds which are issued to refund older bonds are called refunding bonds or pre-refunding bonds.
How does yield maintenance work?
Yield maintenance is a sort of prepayment penalty that allows investors to attain the same yield as if the borrower made all scheduled interest payments up until the maturity date.
What is legal defeasance?
Legal defeasance The deposit of cashand permitted securities, as specified in the bond indenture, into an irrevocable trustsufficient to enable the issuerto fully discharge its obligationsunder the bond indenture. Copyright © 2012, Campbell R. Harvey. All Rights Reserved. Legal Defeasance 1.
What is’defeasance’?
What is ‘Defeasance’. Defeasance is a provision that voids a bond or loan when the borrower sets aside cash or bonds sufficient enough to service the borrower’s debt.
What is a defeased security?
BREAKING DOWN ‘Defeased Securities’. A defeased security is a bond which, after its issuance, has its outstanding debt collateralized by cash equivalents or risk-free securities.
What is defeasance of debt?
Usually defeasance occurs when a borrower ownsa portfolio of Treasury securities, the couponsof which are used to service a debt. When the borrowerhas set aside sufficient assetsto cover the debt, the debt does not need to be recorded on a balance sheet.