Collateralized Mortgage Obligation (CMO)
What is Collateralized Mortgage Obligation (CMO)?
A mortgage-backed instrument known as a collateralized mortgage obligation (CMO) consists of a pool of mortgages that have been packaged together and sold as an investment. CMOs get cash flows as borrowers pay off the mortgages that serve as security for these securities, and they are organized by maturity and amount of risk. CMOs then pay out principle and interest to their investors in accordance with pre-established guidelines and agreements.
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