Research

U.S. CMBS Defeasance Activity 2015

CMBS defeasance activity increased in 2015, rising to $22.4 billion, a 7% increase over 2014 and a 70% increase over $13.2 billion in 2013. The $22.4 billion 2015 defeasance figure represents the highest level since the market’s peak at $32.4 billion in 2007.

U.S. CMBS Defeasance Activity 2014

CMBS defeasance activity increased substantially in 2014, rising to $20.9 billion, a 58% increase over 2013. Defeasance activity increased significantly during the past two years and 2014 activity was in-line with the 2005 level.

U.S. CMBS Defeasance Activity 2013

Defeasance activity increased dramatically in 2013, rising 123% over 2012. At $13.2 billion, 2013 defeasance activity rose to its highest level since the market’s peak at $32.4 billion in 2007.

U.S. CMBS Defeasance Activity 2012

In 2012, defeasance increased significantly over 2011, rising to its highest level since its peak in 2007. The increase was due to several factors.

U.S. CMBS Defeasance Activity 2011

In 2011, defeasance improved significantly over 2010, rising to its highest level since its peak in 2007.

U.S. CMBS Defeasance Activity 2010

Defeasance activity in 2010 showed a significant pick-up from a depressed level in 2009. Following are the key observations from 2010 defeasance activity.

U.S. CMBS Defeasance Activity 2008

The dramatic increase in defeasance of loans in commercial mortgage- backed securities (CMBS) transactions since 2005 came to an abrupt halt in 2008 due to declines in commercial real estate values and lack of liquidity in the financial markets.

U.S. CMBS Defeasance Activity 2007

Real estate appreciation continued to be strong in 2007, leading to a surge of defeasance in the first half of the year.

U.S. CMBS Defeasance Activity 2006

Defeasance has continued to increase significantly year over year since 2003 and has become an important factor in the credit profile of many seasoned CMBS transactions.

Defeasance and 1031 Exchanges

The defeasance of loans that have been included in “pools” of commercial mortgage-backed securities has become increasingly common over the last several years.

U.S. CMBS Defeasance Activity 2005

The use of defeasance to unlock borrowers' equity embedded in real estate assets has grown at an unprecedented rate over the past several years.

Defeasance a Practical Guide

Defeasance first became a part of the commercial mortgage-backed securities (“CMBS”) world during the early 1990s as a mechanism to make pricing on CMBS more favorable and is now a fixture in the CMBS industry.

Defeasance: Now a Viable Option in New York State

Until recently, New York title companies and real estate lawyers feared that New York State would charge a second mortgage recording tax in connection with any “defeasance” of a mortgage.

Defeasance by Design Update 2001

In May 1999, Fitch published a report that explained the major features of defeasance, a type of call protection that was becoming more prominent in commercial mortgage-backed securities (CMBS).

Anatomy of Defeasance

Many CMBS prohibit prepayment. However, in lieu of prepaying the loan, after a lockout period, the borrower is permitted to pledge US treasury obligations as substituted collateral and obtain the release of the liens encumbering the property.