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The Costs of Defeasance
The costs of a defeasance consist of both the cost of the securities and the various third-party fees associated with the documentation and processing of the transaction. The cost of the securities is a function of the spread between the interest rate of the loan and the yield of the securities. Acceptable securities typically include noncallable U.S. Treasury obligations but in some cases also allow for noncallable obligations of agencies such as Fannie Mae and Freddie Mac. If the loan coupon is higher than the yield of the government securities or agencies then there is a defeasance premium. If the loan coupon is higher than the yield of the government securities or agencies then there is a defeasance discount.

Documentation and Processing Fees by various entities involved in the transaction tend to be fixed and estimates are detailed below:

Servicer Processing $7,500-$27,500
Servicer Legal $15,000
Accountant $4,000-$10,000
Custodian / Securities Intermediary $7,500
Rating Agency $0-$15,000
Special Servicer $0-$5,000
Special NY Counsel $0-$10,000
Successor Borrower $7,500
DefeaseIt $10,000
Total $46,500
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