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Simple English definitions for legal terms
corporate-mortgage trust
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A quick definition of corporate-mortgage trust:
Corporate-Mortgage Trust: A way for companies to borrow money by selling bonds that are backed by property held in a trust. The trust is managed by an independent trustee who makes sure that the investors who buy the bonds are protected.
A more thorough explanation:
A corporate-mortgage trust is a type of financing arrangement where debentures are issued and secured by property held in trust. An independent trustee is appointed to protect the interests of those who purchase the debentures.
ABC Corporation wants to raise funds to expand its business operations. It decides to issue debentures that are secured by a property it owns. To ensure the safety of the investors' money, ABC Corporation sets up a corporate-mortgage trust. The trust holds the property as collateral and an independent trustee is appointed to oversee the trust and protect the interests of the debenture holders.
Another example could be a real estate investment trust (REIT) that issues debentures secured by the properties it owns. The REIT sets up a corporate-mortgage trust to protect the interests of the debenture holders.
These examples illustrate how a corporate-mortgage trust can be used as a financing device to secure debentures with property held in trust and protect the interests of investors through an independent trustee.