Question

In an A/B note structure, the B-note is typically included in the CMBS loan collateral pool....

In an A/B note structure, the B-note is typically included in the CMBS loan collateral pool. Therefore, the borrower makes separate debt service payments directly to both the A-note and the B-note holders.

TRUE/FALSE

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Answer #1

The A/B structure involves a bank advancing on two loan simultaneously.

How a B Note works: A lender, typically a bank, originates a secured loan. This secured loan is split into peices. Which becomes tranches of A-Note & B-Note. As long as borrower is paying mortgage on time, investor in each tranches will receive their payments concurremntly. But if the borrower defaults A-Notes are paid their interest and payments before B-Notes. So B-Notes carry more risk and return.

CMBS (Commercial mortgage backed securities are fixed income investment products that are backed by mortgages on commercial properties. CMBS provide liquidity to commercial and real estate lenders.

Therefore, in an A/B note structure, the B-note is typically included in the CMBS loan collateral pool.

The statement is True.

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