In one sentence
A loan secured by another loan, where a lender finances a debt fund or originator's position in a mortgage rather than the real estate directly.
The longer version
In note-on-note financing, the collateral is a mortgage note, not the property. A bank or larger lender advances against an originator's or fund's loan position, giving that originator leverage on its lending.
It is a behind-the-scenes structure that lets debt funds and originators scale, and it adds a layer of documentation and intercreditor considerations above the underlying loan.
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