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Collateralized mortgage obligation

• Is a complex bond structure which reallocates interest and principal payment streams. These tranches, which are often designated as A to Z pieces or securities, are engineered from mortgage backed securities used as the underlying collateral. Collateralized Mortgage Obligations come in many shapes and sizes and are often viewed as unique constructions. Some of the more commonly named tranches are: Interest Only, Principal Only, Floater, Inverse Floater, Planned Amortization Class, Support, Scheduled, Sequential, Targeted Amortization Class, and Z or Accrual Bond. Often, many of these securities contain option characteristics. Related structures are Collateralized Bond Obligations and Collateralized Loan Obligations.

• Abbreviated CMO. A security backed by a pool of pass-throughs, structured so that there are several classes of bondholders with varying maturities, called tranches. The principal payments from the underlying pool of pass-through securities are used to retire the bonds on a priority basis as specified in the prospectus. Related: mortgage pass-through security

• A Collateralized Mortgage Obligation (CMO) is a vehicle that repackages the cashflows in a way that redistributes prepayment risk.

 
 

Follow this link for all the terms related to mortgage.

 
 Embedded terms in definition
 Accrual bond
Amortization
Basis
Bond
Class
Cmo
Collateralized loan obligation
Collateralized mortgage obligations
Collateral
Floater
Interest only
Interest
Inverse floater
Mortgage backed securities
Mortgage
Option
Planned amortization class
Pool
Prepayment risk
Prepayment
Principal only
Principal
Prospectus
Retire
Risk
Securities
Security
Sequential
Support
Targeted amortization class
Underlying
Z or accrual bond
Z
 
 Related Terms
 

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