Collateralized Mortgage Obligations (CMOs)
Collateralized Mortgage Obligations (CMOs) are a type of mortgage-backed security (MBS). Unlike a mortgage pass-through, in which all investors participate proportionately in the net cash flows from the mortgage collateral, with a CMO, different bond classes are issued, which participate in different components, called tranches, of the net cash flows. A CMO is any one of those bonds. The tranches are structured to each have their own risk characteristics and maturity range. In this way, investors can select a bond offering the characteristics which most closely meet their needs. Collateral for the securitization may represent a pool of mortgages, but it is often a mortgage pass-through.
Agency and Private CMOs offer investors the highest AAA quality yields available in the market in exchange for flexible timing of principal return.
Financial professionals may obtain more information including current offerings by calling (800) 327-1546.