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DEFINITION of 'Mortgage-Backed Revenue Bond'

A type of municipal agreement that pays holders based on revenues generated from real estate. Financial institutions also typically offer these bonds at relatively low interest rates. Proceeds are used to provide funds to these institutions, which in return use the funds to make low interest rate mortgage loans.



Municipalities would use such bonds to fund public construction projects, for example. Borrowers of these mortgages are responsible for interest and principal payments.

BREAKING DOWN 'Mortgage-Backed Revenue Bond'

Sometimes referred to as a housing bond, which is issued by a local housing authority. These bonds can either be short- or long-term, and are often used for construction of low- or middle-income housing or projects that help the community and the environment. Short-term bonds are typically sold as $5,000 denominations with a maturity that varies between 18 months to four years. Longer-term bonds are issued under federal agency contracts.

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