What is defeasance?
A collateral-substitution mechanism: instead of paying off the loan, the borrower buys permitted securities (often Treasuries) whose cash flows cover the remaining scheduled debt payments. The securities replace the real estate as collateral, releasing the property.
Where you will use it: this term comes up in the Real Estate Finance course, and the full course glossary collects every term in one place.
Related terms
From the free Real Estate Finance course by Devon Coombs, CPA, MBA.