Presidential Title, Inc. has considerable experience with settling defeasance transactions. In a defeasance transaction, the lender releases the lien on the original collateral (generally real estate) and establishes a new security interest in replacement collateral. The replacement collateral is usually in the form of government-backed securities and is structured in such a way that it will produce sufficient cash flow to make all remaining payments due under the note in accordance with the payment schedule. Throughout this process, the original note stays in effect with minimal or no modification. As mentioned, the securities are pledged to the lender in exchange for the lender’s release of its lien on the real estate, essentially freeing up the property to serve as collateral for a new loan.
Loan defeasance transactions involve a number of parties, require a myriad of specific procedures and generally take about 30 days to complete. It is, therefore, imperative that borrowers, in choosing a title company to settle a defeasance transaction, select a reliable and reputable group that is well versed in the intricacies and nuances associated with the settlement of defeasance transactions.