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conduit financing

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Conduit Financing
A type of financing in which a government or private company issues debt on behalf of a non-profit organization. The debt is guaranteed by the revenue the project that the debt finances generates. Conduit financing is used for the non-profit's capital expenditures.

conduit financing

A method of providing loan money through a debt instrument that blends features of a traditional pass-through mortgage security and a bond.Traded on Wall Street as securities known as REMICs—real estate mortgage investment conduits.For real estate borrowers, the single most important feature of conduit financing is the very large prepayment penalty imposed on all such transactions.The success of the entire securitization process depends upon trustee receipt of regular monthly income for distribution to bondholders according to a prearranged schedule. If a borrower pays off the loan early,that loan will no longer earn any interest,which affects the money available for payment to investors. In order to compensate, the trustee will have to go out into the marketplace and purchase an investment to replace the mortgage paid off. That investment may cost a premium price,so the prepayment penalty is used to offset the premium.



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An illustration of the ability of a high-volume mortgage intermediary like Meridian to deliver conduit financing for relatively small loans is our deal on 239 Knickerbocker Avenue in Brooklyn.
The court held that the nature of the institution is irrelevant and that the conduit financing advanced a governmental interest without creating the impression that the government was endorsing religion.
To apply, companies contact a financial adviser who helps them put together the necessary paperwork and guides them through a roughly 90-day process that, if successful, leads toward what is known as conduit financing.
 
 
 
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