A bond secured by a mortgage on one or more assets. These bonds are typically backed by real estate holdings and/or real property such as equipment. In a default situation, mortgage bondholders have a claim to the underlying property and could sell it off to compensate for the default.

Investopedia Says:
Mortgage bonds offer the investor a great deal of protection in that the principal is secured by a valuable asset that could theoretically be sold off to cover the debt. However, because of this inherent safety, the average mortgage bond tends to yield a lower rate of return than traditional corporate bonds that are backed only by the corporation's promise and ability to pay.

Related Links:
Find out which bonds you should be investing in and when you should be buying them. Too Many Bonds To Choose From?
Mortgage-backed securities can offer monthly income, a fixed interest rate and even government backing. Profit From Mortgage Debt With MBS
Find out how fixed-income investments evolved in the past century and what it means today. The Bond Market: A Look Back

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