Defeasance Process


DEFINITION of 'Defeasance Process'

A process to substitute collateral when looking to sell or refinance an existing property which was acquired through a real-estate loan. Plainly speaking, the defeasement process involves the remainder of the amount owing on the loan being used to purchase government securities which are then given to the lender in exchange for releasing the property for refinance or sale by the borrower. It is a complicated process involving many outside parties such as lawyers and accountants, and takes on average 30-45 days to complete. If a quick sale is necessary, the process can often be sped up, however, a premium is paid for this expediation.

BREAKING DOWN 'Defeasance Process'

While there are variations on the steps taken to ensure proper execution of the defeasement process, it is most often involves multiple steps and multiple parties. The cost of the process is determined by the transaction costs of purchasing the securities as well as the labor costs of all of the involved parties.

  1. Security

    A financial instrument that represents an ownership position ...
  2. Collateral

    Property or other assets that a borrower offers a lender to secure ...
  3. Lien

    The legal right of a creditor to sell the collateral property ...
  4. Recession

    A significant decline in activity across the economy, lasting ...
  5. Commercial Loan

    A debt-based funding arrangement that a business can set up with ...
  6. Loan

    The act of giving money, property or other material goods to ...
Related Articles
  1. Credit & Loans

    4 Steps To Attaining A Mortgage

    It starts with knowing your choices as well as your price range. We show you how to get there.
  2. Retirement

    Holding Titles On Real Property

    Find out how best to claim and convey ownership on your assets.
  3. Home & Auto

    Attention Home Buyers! Why You Need A Lawyer

    Property transactions are complex and subject to specific state/local rules. A professional can simplify the process.
  4. Mutual Funds & ETFs

    Financial Institutions: Stretched Too Thin?

    Find out how to evaluate a firm's loan portfolio to determine its financial health.
  5. Entrepreneurship

    How Pawnshops Make Money

    Learn about the various ways that a pawn shop makes money, including the primary revenue sources of making personal loans and selling retail items.
  6. Credit & Loans

    Have Bad Credit? 6 Ways to a Personal Loan Anyway

    It'll cost you more, but borrowing is definitely doable. Here's how to proceed.
  7. Credit & Loans

    Personal Loan Rates: 6 Ways to Find the Best Deals

    Terms can vary tremendously, so you better shop around, both in person and online.
  8. Credit & Loans

    Personal Loans: Compare the 6 Biggest Banks

    Need a personal loan? You may stop by one of these big banks for help. Their offerings vary in size, rates and loan types, which means you have options.
  9. Credit & Loans

    Unsecured Personal Loans: 8 Sneaky Traps

    If you are seeking a personal loan, be aware of these pitfalls before you proceed.
  10. Credit & Loans

    How To Minimize Holiday Debt Before It Happens

    Holiday expenses can drown you in debt. Find out how to avoid this festive spending hangover.
  1. Can personal loans be included in bankruptcy?

    Personal loans from friends, family and employers fall under common categories of debt that can be discharged in the case ... Read Full Answer >>
  2. Are personal loans tax deductible?

    Interest paid on personal loans is not tax deductible. If you take out a loan to buy a car for personal use or to cover other ... Read Full Answer >>
  3. Are personal loans bad for your credit score?

    Taking out a personal loan is not bad for your credit score in and of itself. However, there are several factors that come ... Read Full Answer >>
  4. Can Sallie Mae loans be forgiven?

    Sallie Mae loans, similar to other private loans, cannot be forgiven. As of 2015, there is no option for private student ... Read Full Answer >>
  5. Can Sallie Mae loans be consolidated?

    Sallie Mae loans can be consolidated with other federal loans, but not with private loans. For federal loan consolidation, ... Read Full Answer >>
  6. Are Sallie Mae loans considered federal loans?

    Sallie Mae is a private lender, so its direct loans are not federal loans. Basically, federal student loans consist of money ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Bar Chart

    A style of chart used by some technical analysts, on which, as illustrated below, the top of the vertical line indicates ...
  2. Bullish Engulfing Pattern

    A chart pattern that forms when a small black candlestick is followed by a large white candlestick that completely eclipses ...
  3. Cyber Monday

    An expression used in online retailing to describe the Monday following U.S. Thanksgiving weekend. Cyber Monday is generally ...
  4. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  5. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
Trading Center