Business and Personal Finance Dictionary

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• MORTGAGE BONDS
  
  A common type of secured corporate bond. The bond indenture for mortgage bonds, along with associated documents executed by the issuer, provides for the bondholders to have, through the trustee, an interest in real property collateral. For example, the bonds may be secured by a mortgage on real estate used by the company. This may be the case when the bond proceeds are used to finance the construction of a factory or plant. (Many pollution control and utility bonds are mortgage bonds.) It is important to understand that the mortgage is not the sole, or even the primary, backing for the repayment of these bonds. These debts are still financial obligations that the firm must repay even if the value of the collateral falls.
  
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