Collateralized Mortgage Obligation - CMO

Collateralized Mortgage Obligation - CMO

A type of mortgage backed security that creates separate pools of pass-through rates for different classes of bondholders with varying maturities, called tranches. The repayments from the pool of pass-through securities are used to retire the bonds in the order specified by the bonds prospectus.

Notes:

CMOs usually offer low returns because they are very low risk and sometimes backed by government securities.

See also: Collateralized Debt Obligation (CDO), Commercial Mortgage Backed Securities (CMBS), Mortgage Backed Security (MBS), Pass-Through Security, Structured Finance, Tranches