CMOs offer a variety of tranche types to meet changing market conditions as well as demand. The structure of the CMO and the various tranche types, however, do not eliminate market risk, prepayment risk or other general risks associated with CMOs.
MBS are complex securities and are not suitable for all investors. The average life and yield of a MBS will fluctuate depending on the actual prepayment experience of the underlying mortgages and changes in current interest rates. If MBS are sold in the secondary market prior to maturity, the proceeds received may be more or less than the original amount invested.