Day 1: Purchase of the Securities and Close Underlying Transaction into Escrow (“Circle and Funding Day”):
- Servicer’s counsel confirms approval and receipt of all due diligence items from the defeasance checklist, including original signatures to the defeasance documents.
- Buyer and/or New Lender confirm they are in position to fund into escrow by close of business day 1 or first thing in the morning on day 2.
- Borrower authorizes Pensford to “circle” or initiate the purchase of securities to settle day 2. Borrower must email the “Securities Purchase Instructions and Authorization” form (a deal specific form will be sent out prior to closing) to Pensford to initiate the purchase of Securities.
- Note: SECURITIES MUST BE PAID FOR ON DAY 2 BY 2:00pm ET; otherwise, any breakage costs are the Borrower’s responsibility.
- Pensford “circles” the portfolio of securities through an outside broker-dealer and distributes final numbers to all parties via the final defeasance closing statement
- Title company incorporates these numbers into the underlying settlement statement.
- Borrower (or buyer) and new lender facilitate closing the underlying transaction into escrow.
- Servicer’s counsel circulates the defeasance Closing Instruction Letter and distributes all original mortgage release or assignment documents to the title company (if they have not already been sent and received).
- Title company confirms receipt of the following items. In some cases, this is by COB day 1, otherwise, it occurs the morning of day 2.
- Funds sufficient to close the defeasance and underlying transaction from the buyer and new lender
- Original mortgage release or assignment documents
- Borrower and title company email signatures for the Closing Instruction Letter to servicer’s counsel and Pensford by the end of business and title company confirms there are no issues that will prevent the flow of funds on day 2.
Day 2: Settle Securities and Record Mortgage Documents (“Closing Day”)
- Outside Broker-Dealer transfers the securities electronically to the securities intermediary for settlement.
- Securities intermediary confirms receipt of the securities.
- Servicer’s counsel instructs the title company to disburse funds, pursuant to the Closing Instruction Letter, to securities intermediary in order to settle the securities purchase.
- **NOTE: THIS WIRE MUST BE RECEIVED BY THE SECURITIES INTERMEDIARY BY 2:00pm ET otherwise, the defeasance will fail to close.
- Title company provides Fed reference number to securities intermediary to track wire.
- Securities intermediary confirms receipt of the wire to pay for the securities before 2:00pm ET.
- Servicer’s counsel instructs title company to break escrow to file/record mortgage documents and disburse all remaining wires per the Closing Instruction Letter.
- Defeasance closes once all items are completed per the Closing Instruction Letter.