Defeasance Kick Off – Delivering the Notice
How do I begin the defeasance process?
Most Loan Agreements require that notice of intent to defease be delivered to the master servicer no less than 30 days prior to the closing date.
Is there anything else?
Along with the required notice, the servicer will also require a good faith deposit be submitted, which typically amounts to between $20,000 and $40,000 (depending on the servicer and loan terms).
The required deposit will be credited towards the servicer’s processing fee and also serves as a retainer for legal counsel until closing. The fees for servicer’s counsel will be paid at closing and any excess good faith deposit will be returned within 10 business days.
Keep in mind, if the deal falls apart after the good faith deposit is delivered, there’s a good chance most of these funds will be sunk.
What happens if I need to close in less than 30 days?
If your closing is set to occur less than 30 days from when notice is provided, then you will likely be subject to an expedite fee. The fee is generally $5k-10k depending on how many days remain until closing and is split between the servicer and their counsel for accommodating the accelerated timeline.
It’s important to note that if you kick off the defeasance process and elect to expedite, but later the closing is pushed back, you would still be subject to the additional fee.
Got it, the notice and deposit are in. What happens next?
Once the notice and deposit are delivered to the servicer, defeasance counsel will be engaged who will reach out to us to begin scheduling a kickoff call. At this point the ball is officially rolling and we can get things moving to ensure a smooth closing!
Have a question? Reach out to firstname.lastname@example.org or 704-887-9880.