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A mortgage bond issue is secured by a lien on specific assets of the commercial firms - usually fixed assets. The specific property securing the bonds is described in detail in the mortgage, which is the legal document giving the bondholder a lien on the property. As with other secured lending arrangements, the market value of the collateral should exceed the amount of the bond issue by a reasonable margin of safety. If the commercial firm defaults in any of the provisions of the bond indenture, the trustee on behalf of the bondholders, has the power to foreclose. In a foreclosure, the trustee takes over the property and sells it, using the proceeds to pay the bonds. If the proceeds are less than the amount of the issue outstanding, the bondholders become general creditors for the residual amount. A commercial firm may have more than one bond issue secured by the same property. If a bond issue is secured by a second mortgage and the first mortgagee forecloses, the first mortgage bondholders must be paid the full amount owed them before there can be any distribution to the second mortgage bondholders.

The typical annual volume of commercial mortgage backed securities are $100 billion in USA. Since Germany started letting its mortgage banks invest in U.S. assets, those banks have made more of a ripple than a splash. In early 2002, Germany gave its mortgage banks (hypothekenbanken in German) clearance to invest in U.S. assets, a privilege that had long been available to commercial banks, which sometimes own the mortgage lenders as part of their business.