BROWSE

B-Note

What is 'B-Note'

The secondary tranche in a commercial mortgage-backed security. B notes are a component of A/B financing or A/B/C financing. They have a lower credit rating than a class-A notes, but a higher credit rating than a class-C notes. The financed property serves as collateral for a B note.


Also known as a "class B note".

Explaining 'B-Note'

As long as the borrower is paying the mortgage on time (in other words, as long as the loan is performing), investors in all tranches will receive their respective shares of the borrower's payments concurrently. However, if the borrower defaults, holders of class A notes are paid their interest and principal payments before holders of class B notes.


Similarly, holders of class B notes are paid before holders of class C notes. The interest rate and rating on class B notes reflects this level of risk. Alternatives to A/B note or A/B/C note financing include preferred equity, mezzanine debt and second mortgages, all of which are forms of secondary financing used in addition to a first mortgage.


Further Reading


Financial development, growth, and the distribution of income
www.journals.uchicago.edu [PDF]
… that encouraged the trade-off belief [between growth and in- equality] among classical economists who developed … in line with Goldsmith (1969), intermediaries allocate resources to the place in the economic system in … I E [0, 1], f (' + (1 -I 8 dF(0) < 1. My max(O, b) Note that this …

Financial markets in development, and the development of financial marketsFinancial markets in development, and the development of financial markets
www.sciencedirect.com [PDF]
… that encouraged the trade-off belief [between growth and in- equality] among classical economists who developed … in line with Goldsmith (1969), intermediaries allocate resources to the place in the economic system in … I E [0, 1], f (' + (1 -I 8 dF(0) < 1. My max(O, b) Note that this …

Financial liberalization and banking crises in emerging economiesFinancial liberalization and banking crises in emerging economies
www.sciencedirect.com [PDF]
… that encouraged the trade-off belief [between growth and in- equality] among classical economists who developed … in line with Goldsmith (1969), intermediaries allocate resources to the place in the economic system in … I E [0, 1], f (' + (1 -I 8 dF(0) < 1. My max(O, b) Note that this …

Why does financial sector growth crowd out real economic growth?Why does financial sector growth crowd out real economic growth?
papers.ssrn.com [PDF]
… that encouraged the trade-off belief [between growth and in- equality] among classical economists who developed … in line with Goldsmith (1969), intermediaries allocate resources to the place in the economic system in … I E [0, 1], f (' + (1 -I 8 dF(0) < 1. My max(O, b) Note that this …

Supply contracts with financial hedgingSupply contracts with financial hedging
pubsonline.informs.org [PDF]
… that encouraged the trade-off belief [between growth and in- equality] among classical economists who developed … in line with Goldsmith (1969), intermediaries allocate resources to the place in the economic system in … I E [0, 1], f (' + (1 -I 8 dF(0) < 1. My max(O, b) Note that this …

Costly monitoring, financial intermediation, and equilibrium credit rationingCostly monitoring, financial intermediation, and equilibrium credit rationing
www.sciencedirect.com [PDF]
… that encouraged the trade-off belief [between growth and in- equality] among classical economists who developed … in line with Goldsmith (1969), intermediaries allocate resources to the place in the economic system in … I E [0, 1], f (' + (1 -I 8 dF(0) < 1. My max(O, b) Note that this …

Financial structure, informality and developmentFinancial structure, informality and development
www.sciencedirect.com [PDF]
… that encouraged the trade-off belief [between growth and in- equality] among classical economists who developed … in line with Goldsmith (1969), intermediaries allocate resources to the place in the economic system in … I E [0, 1], f (' + (1 -I 8 dF(0) < 1. My max(O, b) Note that this …

Economic consequences of the declining relevance of financial reportsEconomic consequences of the declining relevance of financial reports
onlinelibrary.wiley.com [PDF]
… that encouraged the trade-off belief [between growth and in- equality] among classical economists who developed … in line with Goldsmith (1969), intermediaries allocate resources to the place in the economic system in … I E [0, 1], f (' + (1 -I 8 dF(0) < 1. My max(O, b) Note that this …

Child labour, fertility, and economic growthChild labour, fertility, and economic growth
academic.oup.com [PDF]
… that encouraged the trade-off belief [between growth and in- equality] among classical economists who developed … in line with Goldsmith (1969), intermediaries allocate resources to the place in the economic system in … I E [0, 1], f (' + (1 -I 8 dF(0) < 1. My max(O, b) Note that this …



Q&A About B-Note


How does economics study distribution?

Economics studies distribution by examining factors such as supply and demand for a good or service in order to determine the price of a good or service in an economy.

What are the different types of notes that can be used for commercial mortgage-backed securities?

There are three different types of notes that can be used for commercial mortgage-backed securities, which include class A, class B and class C. Class A notes have the highest credit rating while class C notes have the lowest credit rating. Class B notes fall between these two ratings.

What is a B note?

A B note is the secondary tranche in a commercial mortgage-backed security.

What does AB financing refer to?

AB financing refers to an ABC financing structure.

How do holders of each note receive their share of payments from borrowers if they perform on time?

If borrowers pay on time, then all investors will receive their respective shares of payments concurrently from borrowers. However, if borrowers default, then holders of class A notes are paid before holders of class B or C notes. The interest rate and rating on class B reflects this level of risk. Alternatives to ABC note financing include preferred equity, mezzanine debt and second mortgages which are forms secondary financing used in addition to a first mortgage.

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