The substitution of U.S. Treasury or Agency securities for real estate as collateral for a loan in an amount sufficient to pay each scheduled periodic payment and the final balloon payment on the loan so thatthe loan is paid in full from the new collateral in accordance with the loan’s scheduled payment terms.
Diabolical Questions include: Are defeasance provisions enforceable by specific performance outside of bankruptcy? If so, are they also enforceable by specific performance in a bankruptcy case?
See also Alchemy, Call Protection, Cramdown, Default Prepayment, Indubitable Equivalent, Yield Maintenance.