A mortgage bond is a bond that has some collateral to make the security safer as investment. In case of bond default the creditor gets back his money or part of it from the sale of the assets that were pledged. Usually mortgage bonds have higher rating than bonds without a mortgage.
It is important to know that the mortgage can be secondary as well as primary. If mortgage is secondary, then creditor gets its share only if there is left something after primary mortgage creditors take its share. Primary mortgage is much more valuable than the secondary.
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