Estimate the total cost of defeasing your CMBS or conduit commercial loan. See the Treasury portfolio cost, transaction fees, and how it compares to yield maintenance.
⚠️ Important: Defeasance costs are highly variable and depend on Treasury market conditions at the time of execution. The Treasury portfolio premium can change daily. Transaction fees vary by servicer, law firm, and deal complexity. Get a formal defeasance quote from a defeasance consultant before committing.
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Exploring CMBS loan exit options? Our advisors coordinate defeasance consultants and refinance lenders.
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The most complex — and often most expensive — way to exit a CMBS loan.
Instead of paying a penalty, you purchase a portfolio of US Treasury bonds that exactly replicate your remaining loan payments. These bonds replace your property as collateral, releasing it from the mortgage. The CMBS trust continues receiving payments from the Treasuries.
The Treasury portfolio costs more than your loan balance when Treasury yields are lower than your note rate. On top of that you pay transaction costs: legal counsel, an accountant to certify that the bond portfolio covers the payments, a securities broker, the servicer, and often rating agency confirmation. Ask for a quote on each item — the calculator lets you enter them separately.
Defeasance costs drop when Treasury rates rise above your note rate (the bond portfolio costs less than the loan balance) or when you are close to maturity (fewer payments to replicate). In a rising rate environment, defeasance can sometimes be less than yield maintenance.
Steps: hire a defeasance consultant, give the servicer the notice your loan documents require, legal review, Treasury portfolio pricing and purchase, closing. A CMBS loan cannot be defeased within two years of its REMIC trust’s startup day (Treas. Reg. §1.860G-2(a)(8)), so most conduit loans start with a lockout of about two years. Your loan documents set the actual lockout and open-period dates.
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Common questions about CMBS defeasance.
Defeasance is a process where you purchase US Treasury bonds that replicate your remaining loan payments, substituting these bonds as collateral for your property. This releases the property from the mortgage without technically "prepaying" the loan — the CMBS trust continues receiving payments from the bond portfolio.
Two parts: the Treasury portfolio premium — what the bonds cost above your loan balance, which depends on how far Treasury yields are below your note rate and how many payments remain — plus transaction costs for legal, accounting, the securities broker, the servicer and rating agency confirmation. Example from this calculator: $5,000,000 left on a 6.0% loan with 60 months to go and $50,000 of fees assumed costs about $298,766 (6.0% of the balance) with Treasuries at 4.0%, but only the $50,000 of fees with Treasuries at 6.5%.
It depends on the notice period in your loan documents and on the servicer. After notice, the consultant, attorneys and accountant prepare the documents, the securities are priced and bought, and the collateral is released at closing. Read the prepayment section of your note and start well before your sale or refinance closing date.
No. A CMBS loan cannot be defeased within two years of its REMIC trust’s startup day — a federal tax rule (Treas. Reg. §1.860G-2(a)(8)) — so most conduit loans start with a lockout of about two years. After that, defeasance is usually allowed until a short open period before maturity. Your loan documents set the exact dates.
It depends on market conditions. Defeasance carries fixed transaction costs that yield maintenance does not, but the Treasury portfolio premium can be lower than the yield maintenance calculation. When Treasury yields rise, both get cheaper. Your loan documents usually decide which one applies; when you have a choice, get quotes for both.
We can introduce you to defeasance consultants, compare the defeasance estimate with a sale or refinance, and line up the new loan so it closes on the same timeline as the defeasance. There are no upfront fees.
Our advisors coordinate defeasance consultants, compare exit strategies, and line up your refinancing — all in one coordinated process.
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