Businesses are often financed with commercial real-estate loans, which are then securitized into mortgage-backed pooled investments. These loans often offer lower interest rates for the borrowers than a conventional mortgage loan does. However these loans typically cannot be prepaid without incurring a significant prepayment penalty and alternatively, borrowers have an option to defease the loan by purchasing securities significant to fund the remaining payments due on the loan.
The securities purchased to be held in the Defeasance Account are known as the Defeasance Securities. Specifically in a commercial defeasance, the Defeasance Securities become assets of a new entity, the successor borrower, who in turn assumes the liability on the loan. Once this occurs, the real estate collateral securing the mortgage loan is released from the lien and replaced or substituted by the Defeasance Securities.
A nationally recognized independent certified public accounting firm is required to provide written verification to the trustee pursuant to legal documents and rating agencies requirements, which compare the sufficiency of the future cash flow from the Defeasance Securities to the remaining payment obligations for the defeased loan. We are one of two leading CPAs firms in the United States, recognized nationally, to provide this service. We have experience in all 50 states and Canada and have provided verification services for more than 7,000 engagements, including more than fifty $100 million or larger transactions.