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What is Defeasance? Defeasance is a form of a prepayment fee on conduit loans
redeemed prior to maturity.
Prepayment options for fixed rate conduit loans include defeasance, declining
fixed percentages and two yield maintenance options.
Defeasance allows the borrower to purchase
substitute collateral for the conduit loan. With
conduit loan defeasance, single or multiple US
Treasury securities with varying maturities must
be purchased in order to complete the
defeasance. There is no minimum prepayment under
Conduit Loan Defeasance, and in some
circumstances, the borrower could actually
receive a payment when the conduit loan is
defeased.
Yield Maintenance is based on a minimum yield
to the investor that purchased the conduit loan
(or the Fannie Mae security backed by the loan)
and is basically the present value of the
difference between the conduit loan?s interest
rate and current rates with a similar maturity
date as the original conduit loan. Historically,
Yield Maintenance terms have been 6 months less
than the actual conduit loan term.
How much will it cost to defease a conduit
loan? Is your conduit loan maturing and you
would like to calculate the defeasance cost?
Capital Assets,Inc provides a defeasance loan calculator
online to assist our visitors with these
questions and more.
Conduit Financing Provides The Lowest Rates
To Borrowers
CMBS loan programs provide the lowest fixed
rates…period. Why? The loan is funded with
bond money. Our investment banking partners
securitize (bundle) the loan and sells mortgage
backed securities to investors with the asset
(property) serving as the collateral for the
bonds. Property quality grade, tenant quality,
tenant bond grade, property location,
management, seasoning, property cash-flow, and
area CAP rates all impact a borrowers interest
rate either positively or negatively.
Conduit Lending Overview
Conduit loans have been around since the mid
’90s and are somewhat unfamiliar to most
commercial real estate investors. A Real Estate
Conduit Loan is a permanent, fixed-rate
commercial real estate loan structured on a
non-recourse basis according to specific
underwriting and documentation standards. These
standards facilitate the loan’s ultimate
securitization.
Capital Assets,Inc provides conduit loan programs for
commercial real estate property types
nationwide. Our minimum loan size for conduit
financing is $1,000,000. You can review all of
our conduit
loan program guidelines online, check
conduit loan interest rates online, calculate
the cost to defease your CMBS loan, and even
track and review the status of your conduit loan
throughout the entire commercial loan process!
Contact a commercial mortgage specialist at
1-630-454-7400 for more information.
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