Collateralized Mortgage Obligation - CMO
Definition of '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. |
|
Investopedia explains 'Collateralized Mortgage Obligation - CMO'Here is an example how a very simple CMO works: The investors in the CMO are divided up into three classes. They are called either class A, B or C investors. Each class differs in the order they receive principal payments, but receives interest payments as long as it is not completely paid off. Class A investors are paid out first with prepayments and repayments until they are paid off. Then class B investors are paid off, followed by class C investors. In a situation like this, class A investors bear most of the prepayment risk, while class C investors bear the least. |
|
Related Definitions
-
Collateralized Debt Obligation - CDO
-
Dodd-Frank Wall Street Reform and Consumer ...
-
Sequential Growth
-
Real Estate Mortgage Investment Conduit - ...
-
Commercial Mortgage-Backed Securities (CMBS)
-
Mortgage-Backed Security (MBS)
-
Net Interest Margin Securities - NIMS
-
Z-Tranche
-
Sequential Pay CMO
-
Planned Amortization Class (PAC) Tranche
Articles Of Interest
-
Profit From Mortgage Debt With MBS
Mortgage-backed securities can offer monthly income, a fixed interest rate and even government backing. -
Behind The Scenes Of Your Mortgage
Four major players slice and dice your mortgage in the secondary market. -
Understanding Mortgage-Backed Securities
Find out the meaning of this popular asset-backed security and its benefits for banks and investors. -
Asset Allocation In A Bond Portfolio
An investor's fixed-income portfolio can easily beat the average bond fund. Learn how and why! -
What is a tranche?
"Tranche" is actually a French word meaning "slice" or "portion". In the world of investing, it is used to describe a security that can be split up into smaller pieces and subsequently sold to ... -
What is the difference between a collateralized mortgage obligation (CMO) and a collateralized bond obligation (CBO)?
Both collateralized mortgage obligations (CMOs) and collateralized bond obligations (CBOs) are similar in that investors receive payments from a pool of underlying assets. The difference between ... -
How To Keep Costs Low When Refinancing Your Home
With interest rates still being relatively low, now is a great time to capitalize on refinancing your home. Be aware of what fees are involved in a refinance, and how to keep these costs low. -
Should You Offer Alternative Investments?
Find out what problems arise for financial representatives when they start to diversify their client offerings. -
How To Properly Research For The Best Mortgage Rate
You’ve probably been told to shop around for the best rate, but what exactly does that entail? Find out how to ensure you're getting the best possible rate on your mortgage. -
What Is A Mortgage?
A mortgage is a loan used to purchase a home, where the property serves as the borrower's collateral.
Free Annual Reports