Mortgage bonds are backed only by the good faith and credit of the issuing company.

Question

Quizplus · Accepted Answer

Mortgage bonds are typically backed by the collateral of the underlying mortgages, such as the properties that the mortgages are attached to. This means that if the issuing company were to default on the bond, the bondholders would have a claim on the properties securing the mortgages. While the creditworthiness of the issuing company is also a factor in the overall risk of the bond, it is not the only source of security for investors.

Mortgage Bonds Are Backed Only by the Good Faith and Credit