debt secured by a real asset. There are two types of mortgage bonds: senior mortgages, which have first claim on assets and earnings and junior mortgages, which have a subordinate lien. A mortgage bond may have a closed-end provision that prevents the firm from issuing additional bonds of the same priority against the same property or may be an open-end mortgage that allows the issuance of additional bonds having equal status with the original issue.
tax-exempt security sold by municipal and state authorities for the purpose of providing low-interest-rate mortgage loans to qualified individuals For most programs, mortgage borrowers must be first-time home buyers with moderate income. The amount of these bonds that may be issued by each state each year is restricted by federal tax law.
bond issue secured by a mortgage on the issuer's property, the lien on which is conveyed to the bondholders by a deed of trust. A mortgage bond may be designated senior, underlying, first, prior, overlying, junior, second, third, and so forth, depending on the priority of the lien. Most of those issued by corporations are first mortgage bonds secured by specific real property and also representing unsecured claims on the general assets of the firm. As such, these bonds enjoy a preferred position relative to unsecured bonds of the issuing corporation.
