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 defeasance of 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 does it mean to defease bonds?
A defeasance is a financing tool by which outstanding bonds may be retired without a bond redemption or implementing an open market buy-back. ... This occurs because the government securities generate the cash flow needed to pay all interest and principal on the outstanding bonds when due.
Is Defease a word?
verb (used with object), de·feased, de·feas·ing. to defeat or annul (a contract, deed, etc.).
How does a defeasance work?
The defeasance process is a means by which borrowers can get out of a mortgage by substituting a portfolio of U.S. Treasury-backed securities for collateral . ... In the case of defeasance, the debt obligation does not go away, but the defeasance releases the mortgaged property from the lien against it.
How do you Defease a 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 Regulation Z?
Regulation Z is a federal law that standardizes how lenders convey the cost of borrowing to consumers . It also restricts certain lending practices and protects consumers from misleading lending practices.
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 is hyper collateral?
Hypothecation occurs when an asset is pledged as collateral to secure a loan . ... Hypothecation occurs most commonly in mortgage lending, where the home serves as collateral but the bank does not have any claim on cash flows or income generated from it unless the borrower defaults.
What is a refunding call?
Refunding occurs when an entity that has issued callable bonds calls those debt securities from the debt holders with the express purpose of reissuing new debt at a lower coupon rate . In essence, the issue of new, lower-interest debt allows the company to prematurely refund the older, higher-interest debt.
What does Deciced mean?
: no longer living especially : recently dead —used of persons Both of his parents are deceased.
What is substance defeasance?
In-substance defeasance occurs when a firm irrevocably deposits cash or other assets Into a trust for the sole purpose of making principal and interest payments on debt as the payments become due.
Are defeasance costs deductible?
A defeasance premium paid under a legal defeasance is deductible as a payment of interest in the year incurred .
How do you stop defeasance?
Defeasance may even be avoided altogether by electing a yield maintenance prepayment penalty or even considering a floating-rate loan, for which Chatham offers strategies to manage interest rate risk.
What does defeasance date mean?
More Definitions of Defeasance Date
Defeasance Date means the date on which all the Bonds shall have been paid and discharged or shall be deemed paid and discharged for purposes of and in accordance with the Indenture , and the Indenture shall have be with its terms.
