Defeasance
Defeasance is a prepayment mechanism, common on CMBS loans, in which the borrower doesn't pay off the loan directly but instead buys a portfolio of government securities that replicates its remaining payment stream, pledging those securities in place of the property. The property is then released free and clear while the securities continue servicing the debt.
Defeasance is coordinated by a specialized consultant: it involves forming a successor borrower entity, purchasing securities that exactly match the remaining payment schedule, and extensive documentation — typically taking four to six weeks and costing tens of thousands of dollars in fees alone, on top of the securities' cost.
Like yield maintenance, defeasance grows more expensive as rates fall relative to the loan rate, since pricier securities are needed to replicate the same payment stream. Unlike yield maintenance, the borrower ends up indirectly owning the replacement securities rather than simply paying a penalty to the lender.