Similar to the process, defeasance fees are highly standardized and driven by fee schedules that apply uniformly to all advisors. In a typical defeasance transaction, you can expect a total of $50K-$70K in third-party fees.
What kind of fees can I expect and where do they typically shake out?
- Servicer Processing Fee - $5K to $40K
- Servicer Counsel Fee - $15K to $25K
- Accountant - $3.5K
- Rating Agency (RAC) review - $0 to $25K+
- Successor Borrower (SB) Fee - $1K to $3.5K
- Successor Borrower Counsel - $4K to $10K
- Securities Intermediary (SI) Fee - $2K to $14K
- Defeasance Consultant Fee (Pensford) - $7.5K
- Security portfolio – dependent on underlying loan terms
How are fees set and are they negotiable?
The respective third-party fees are based on a preset schedule and what applies to a specific deal is driven by stipulations within the loan agreement as well as certain factors such as the loan type, loan size, remaining term of the loan, and even who the servicer is.
Be wary of consultants who promise to obtain reduced servicer processing or counsel fees. Since defeasance advisors are all tied to working with the same pool of third parties, and the fee schedules are pre-set, at the end of the end of the day the only cost an advisor really has control over is their own advisory fee.
When are the defeasance fees due?
To kick-off a defeasance, the master servicer requires a good faith deposit prior to engaging their counsel and commencing the defeasance process. Some advisors also collect a processing fee at the beginning of the process. The remaining fees which include the securities portfolio, counsel, SB, SI, accountant, etc. will be disbursed at closing via escrow.
Pensford will provide estimates ahead of kick-off and circulate draft statements leading up to closing to ensure transparency throughout the entire process.
Feel free to reach out to firstname.lastname@example.org or give us a shout at (704) 668-9880 for a more in-depth breakdown or any additional inquiries.