In general, holders of mortgage bonds do have a preferential claim on the collateral and the
proceeds arising from it. Loan-to-value (LTV) ratios, prudent property valuation rules (e.g.
mortgage lending value), and the trustees or the cover asset monitors acting in the interest of
the covered bondholders reinforce the safety of the covered bond in most countries. The
described attractive risk/return features of the covered bond allows lenders to obtain funds in
capital markets at a reduced borrowing cost (with respect to other wholesale sources)
enabling them to provide medium- or long-term finance for housing, non-residential property
or urban development at a more convenient and stable rate of interest for the borrower.