A B-note is the junior piece of a single commercial mortgage loan that has been split by agreement into a senior A-note and a subordinate B-note. Both pieces are secured by the same mortgage on the same property, but under the co-lender agreement the A-note is paid first and the B-note absorbs losses first. The structure is common in CMBS, where the A-note is securitized and the B-note is sold privately to an investor who typically holds control rights — including influence over special-servicing decisions — until losses erode its position through a control appraisal event.
The A/B split lets one mortgage serve two risk appetites without a second lien. For anyone resolving the credit, the co-lender agreement is the governing document: it fixes the waterfall, the B-note holder's cure and purchase rights, and who directs enforcement — the facts that determine what each piece is worth; see how buyers price a CRE loan.
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.
A B-note is part of the same loan and the same first mortgage — its subordination is contractual, by waterfall. A second mortgage is a separate junior lien on the property; a mezzanine loan is a separate loan secured by the entity's equity rather than the property.
When a new appraisal shows value declines have effectively consumed the B-note's principal, control rights shift from the B-note holder to the senior side. It prevents an out-of-the-money junior holder from directing the workout.
Privately, with pricing driven by the first-loss position, the co-lender terms, and the state of the credit; Standing Bid Capital evaluates B-notes and other subordinate mortgage positions — Request a confidential review.