REMIC Test on Property Release Clause Samples
The REMIC Test on Property Release clause establishes requirements to ensure that any release of property from a mortgage pool does not jeopardize the Real Estate Mortgage Investment Conduit (REMIC) status of a securitization trust. In practice, this clause typically requires that any property release be evaluated to confirm it complies with IRS regulations governing REMICs, such as maintaining certain asset composition and income tests. By enforcing these standards, the clause protects the tax-advantaged status of the trust, thereby safeguarding the interests of investors and ensuring ongoing compliance with federal tax law.
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REMIC Test on Property Release. Notwithstanding anything to the contrary contained herein or in any other Loan Document, if the Loan is included in a REMIC Trust and (a) any Property or any portion of any Property is sought to be released from the Lien of any Security Instrument, whether in connection with the release of any individual Property pursuant to Section 2.5, a Casualty or Condemnation or otherwise, and (b) immediately after any such release the ratio of the unpaid principal balance of the Loan to the value of the remaining Properties (but, in the case of a Casualty or Condemnation, taking into account any proposed Restoration of any remaining Property) is greater than one hundred twenty-five percent (125%) (based solely on real property and excluding any personal property or going concern value) (such value to be determined, in Lender’s sole discretion, by any commercially reasonable method permitted to a REMIC Trust, it being understood that Lender shall not require a new or updated appraisal to make such determination so long as there is another commercially reasonable valuation method available to Lender, which may include a buyer’s purchase price in the case of a contemporaneous arm’s length sale and assumption of the Loan or a broker’s price opinion so long as such method is a commercially reasonable valuation method permitted to a REMIC Trust, as determined in Lender’s sole discretion), the Outstanding Principal Balance must first be paid down by a “qualified amount” as such term is defined in Internal Revenue Service Revenue Procedure 2010-30, as the same may be modified, supplemented, superseded or amended from time to time (regardless of whether Borrowers or Lender actually receive or are entitled to receive any related Net Proceeds in the case of a Casualty or Condemnation), unless Lender receives an opinion of counsel that, if the foregoing prepayment is not made, the applicable REMIC Trust will neither fail to maintain its status as a “real estate mortgage investment conduit” within the meaning of Section 860D of the Code or be subject to any tax, in either case, as a result of such release. If and to the extent the release is in connection with a Casualty or Condemnation, and if Borrowers shall have otherwise satisfied each of the conditions to release of Net Proceeds as set forth in Section 5.3, only such amount of the Net Proceeds then held or controlled by Lender, if any, in excess of the “qualified amount” required to pay down the principal balance of the Loan...