Who Issues CMOs?
The Federal Home Loan Mortgage Corporation (FHLMC) (commonly referred to as “Freddie Mac”), the Federal National Mortgage Association (FNMA) (commonly referred to as “Fannie Mae”), as well as Government National Mortgage Association (GNMA) (commonly referred to as “Ginnie Mae”) are the largest issuers of CMOs.
While FHLMC, FNMA and GNMA dominate the new issue market, in the past many private issuers also regularly brought CMOs to market, known as Private Label or Whole Loan CMOs.
Please consult your financial advisor prior to investing any money in these or other products. These products are offered through many but not all broker-dealers. This information does not constitute an offer to sell or a solicitation of an offer to buy the securities, nor shall there be any sale of those securities, in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful. Certain products are offered by prospectus or offering circular only. Product suitability must be determined for each individual investor.
CMOs are complex securities and are not suitable for all investors. The average life and yield of a CMO will fluctuate depending on the actual prepayment experience of the underlying mortgages and changes in current interest rates. If CMOs are sold in the secondary market prior to maturity, the proceeds received may be more or less than the original amount invested. When considering the benefits of investing in CMOs, potential investors should equally consider the risks of CMO investing, including but not limited to, credit, interest rate, extension and pre-payment risks.