A promise to pay in the form of a bond and secured by a first mortgage. (See " Mortgage.") It has first claim on the property of the corporation, as well as upon the earnings. A bond of this kind is so well understood, that little more need be said of it here. A word of warning, however, may be wise: do not think that a " first mortgage bond " is always secured by a first mortgage on all the property of the corporation. A company, at the time of the issuing of such a bond, may be a comparatively small affair, but later grow into much prominence by the absorbing of other properties. On most, and possibly all, of the absorbed properties there may have already been mortgages existing, and, therefore, the " first mortgage bond " of the original company may be but one of several such on the combined companies, although enjoying the credit attached to bearing the name of the parent company. Several so-called first mortgage bonds of railroads are in effect a second mortgage as they are secured by a first Hen on a relatively small part of the system and by a second lien on a large part.

The statement that a bond is secured by a first mortgage merely signifies that the mortgage is a prior claim to any other indebtedness upon the same property. The property may still be insufficient security for the debt. A first mortgage on some property may be far inferior to a second or third mortgage on another.