Defeasance is a complex, time-sensitive and intensive process that involves many parties. Merrill Lynch makes that process smooth and efficient for you. We will guide you through each step of the way, coordinate with all the different parties and assist you in meeting all the defeasance requirements in time for your refinance or real estate sale. Typically a defeasance transaction requires a 30-60 day notice period to the mortgage loan servicer and culminates in a three-day closing process.

Three-Day Closing Process

A standard defeasance involves a three-day closing process in which the defeasance documents are executed and delivered and securities are purchased and transferred to the Securities Intermediary in connection with a sale or refinance of the mortgaged property. The proceeds from the sale or refinance will provide the funds to pay for the securities.

Day 1: Purchase of Securities Day

• Servicer’s counsel confirms that all executed defeasance documents, opinions and successor borrower documents have been received and approved
• Borrower, Borrower’s counsel, new lender, new lender’s counsel and the title company confirm that the sale or refinance is ready to close and fund into escrow at the title company on Day 2
• Merrill, through a securities broker-dealer, models the final portfolio of securities and provides the final portfolio to the verification accountant for final approval
• Borrower provides Merrill with written authorization to purchase the securities for delivery and payment on Day 3
• Merrill purchases the Securities on behalf of the borrower through the broker-dealer
• Merrill distributes final numbers to all parties for use in finalizing the closing statement
• Servicer’s counsel sends the original release documents to the title company via overnight delivery to be held in escrow.

Day 2: Funding Day

• The underlying transaction is closed into escrow at the title company
• Servicer’s counsel provides final closing instructions to the title company and the Borrower for execution
• The title company confirms receipt of all original release documents from Servicer’s counsel
• The title company verifies receipt of proceeds from the sale or refinance to be held in escrow pending disbursement on Day 3 and confirms there are no issues that will prevent the flow of funds on Day 3.

Day 3: Defeasance Closing Day

• Merrill instructs the broker-dealer to transfer the securities to the Securities Intermediary (Custodian)
• The Securities Intermediary confirms receipt of securities
• Servicer’s counsel instructs the title company to disburse funds to the Securities Intermediary for securities settlement
• The Securities Intermediary confirms receipt of funds from the title company
• Servicer’s counsel authorizes the title company to record the original release documents, disburse all remaining funds per the closing instructions and close the escrow
• The defeasance is now closed, Borrower’s property is lien-free and the title company completes the sale or refinance transaction.