Yield maintenance is a prepayment premium designed to make the lender whole for the interest it loses when a loan is repaid early. It is typically calculated as the present value of the difference between the loan’s interest rate and the yield on a comparable-maturity Treasury over the remaining term, applied to the prepaid balance, often subject to a minimum percentage. When rates have risen since origination, the formula can produce little or no premium beyond that minimum.
Yield maintenance, defeasance, and step-down schedules all govern what it costs to exit a fixed-rate loan early. In a default, whether the premium is owed after acceleration depends on the loan documents and state law, so it is a negotiated item in payoffs, discounted payoffs, and note pricing rather than a fixed number.
Why credits like this reach a workout desk: bank noncurrent commercial real-estate loans have risen while reserve coverage slips at community banks (FDIC Quarterly Banking Profile), and roughly $957 billion of commercial and multifamily mortgage debt was scheduled to mature in 2025 — against a total market of about $4.8–5.0 trillion, ~38% of it held by banks and thrifts (Mortgage Bankers Association). See the CRE distress statistics hub for the full figures and sources.
Primary sources: FDIC Quarterly Banking Profile, Mortgage Bankers Association, and interagency (FDIC / OCC / Federal Reserve) guidance on CRE loan accommodations and workouts. Figures are directional and updated periodically; confirm the latest release before relying on a specific number.
Yield maintenance is a cash premium paid to the lender at payoff; defeasance substitutes a portfolio of securities for the property as collateral, leaving the loan outstanding.
Only if the documents expressly provide for it after acceleration and local law enforces that provision; courts have reached different results.
It can add to the payoff path where enforceable, but buyers usually discount it heavily. Request a confidential review.