DEFINITION of 'Mortgage Cash Flow Obligation - MCFO'

A type of pay-through unsecured general obligation bond that has several classes. Mortgage cash flow obligations (MCFOs) use cash flow from a pool of mortgages that generate revenue to repay investors their principal plus interest. Payments are received from mortgages in the pool and passed on to holders of the MCFO security.

BREAKING DOWN 'Mortgage Cash Flow Obligation - MCFO'

Mortgage cash flow obligations resemble collateralized mortgage obligations (CMOs) in some respects, but they are not the same. MCFOs do not hold a lien on the mortgages held by the security. They are merely obligated by contract to use the income from the mortgages to pay their investors.

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RELATED FAQS
  1. What is the difference between a collateralized mortgage obligation (CMO) and a collateralized ...

    Both collateralized mortgage obligations (CMOs) and collateralized bond obligations (CBOs) are similar in that investors ... Read Answer >>
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    Yes, if your mortgage lender goes bankrupt you do still need to pay your mortgage obligation. Here's what usually happens ... Read Answer >>
  3. Can small investors buy collateralized mortgage obligations (CMOs)?

    Read about collateralized mortgage obligations and their relationship with small investors, plus what risks small investors ... Read Answer >>
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