Defeasance Process Law and Legal Definition

“Defeasance process” is a process to substitute collateral when looking to sell or refinance an existing property which was acquired through a real-estate loan. The process involves the remainder of the amount owing on the loan being used to purchase government securities which are then given to the lender in exchange for releasing the property for refinance or sale by the borrower. It is a complicated process involving many outside parties such as lawyers and accountants. Generally, the process takes 30-45 days to complete. The process can often be sped up if a quick sale is necessary. However, a premium is to be paid for this expediation. There are variations on the steps taken to ensure proper execution of the defeasance process. It also involves multiple steps and multiple parties. The transaction costs of purchasing the securities as well as the labor costs of all of the involved parties determines the cost of the process.