The term “Note” generally refers to a loan or a mortgage whole loan, and these can be transacted at auction.
“Notes” and “loans” are interchangeable and both terms are widely used. Technically speaking, however, the term “Note” refers to the actual promissory note, which is a negotiable instrument. That’s a legal term meaning it can be transferred and assigned to a new owner. A promissory note represents a borrower’s unconditional promise to repay a debt subject to the terms and conditions thereof.
The Note is the key document evidencing a debt or a loan. In a real estate loan, the Note is secured by additional documents, such as a recorded mortgage (lien) or deed of trust on the underlying property, and, depending upon the property type, an assignment of rents and other security instruments. Therefore, when a buyer purchases a Note secured by real property, the entire loan file, i.e. the Note, Deed of Trust and all supporting documents, is transferred or assigned to the buyer, and is collectively referred to as the “Loan.”
Notes being offered are owned by lenders which originated the loans or may be offered for sale by a special servicer on behalf of a Commercial Mortgage Backed Security (CMBS) Trust that now desires to sell its interest as opposed to holding them or foreclosing on the underlying real property.