Frequently Asked Question

When any CMBS conduit loan is defeased, the loan does not get paid off – instead the real property collateral is replaced with a portfolio of securities structured to make all remaining loan payments. In order to exit the defeasance process with no further ties to the defeased loan, a “successor borrower” is formed to assume the defeased loan (and portfolio of securities) from the original borrower. The successor borrower becomes the borrower for the defeased loan through the maturity date.

The defeasance provision in the original loan document dictates which party has the right to form the successor borrower. Depending on the language, the Borrower, Original Lender, CMBS loan servicer or other third party will have the right to form the successor borrower. We are happy to review your loan document language to confirm who holds the right for your particular loan.

Most successor borrower fees are divided into 2 parts: (1) a nominal (typically $1,000) administrative fee and (2) a legal fee (amount varies, but typically from $4,000-$8,000). The successor borrower incurs legal fees because it is a party to the defeasance transaction. For every defeasance closing, the successor borrower must review the original loan documents and defeasance documents, provide current certified organizational documents and 3 legal opinion letters.