More Borrowers Turning to Defeasance Option

Share Article

Trimont Real Estate Advisors Cite Interest Rate Uncertainty in Helping to Drive Demand

Trimont Real Estate Advisors’ defeasance business surpassed $300 million in volume during 2013, 70 percent higher than 2012. With uncertainty surrounding interest rates, many borrowers – especially those with only a year or two remaining on their loans – are finding paying the defeasance premium a more viable option.

“Our 2013 defeasance volume was the highest since 2007, and we anticipate additional growth in 2014,” said Trimont Vice President John Schwartz, who leads the defeasance practice. Schwartz noted that approximately $400 billion of fixed-rate conduit loans will mature through 2017.

“The massive volume of maturities in the coming years will create enormous opportunities for the commercial real estate industry,” he added.

Defeasance allows the borrower the flexibility to refinance, sell or reposition a property in instances where prepaying the loan is not allowed. The mortgage or bond is substituted for qualified collateral, usually government securities, that maintains the trust’s real estate mortgage investment conduit (REMIC) status while providing bondholders with the same payment stream they were previously receiving. Borrowers are free of the lien on the property while lenders still receive their payments.

Due to the complexity of this transaction, most borrowers engage a defeasance consultant such as Trimont Real Estate Advisors to manage the process. Trimont provides the coordination and industry contacts that enable borrowers to focus on the sale or refinance without worrying about the release of collateral from a long-term loan.

About Trimont Real Estate Advisors
Trimont Real Estate Advisors ( provides a full range of services to real estate lenders and investors on both debt and equity investments. Core services include asset management (primary, construction and special), asset servicing, bond finance services, underwriting and due diligence consulting. Trimont is rated as a Primary Servicer, Construction Servicer and Special Servicer by Fitch, Kroll and Standard & Poor’s.

Share article on social media or email:

View article via:

Pdf Print

Contact Author

Greg Winchester
Visit website