CMO. A mortgage-backed, investment-grade bond that separates mortgage pools into different maturity classes. Collateralized mortgage obligations (CMO) are backed by mortgage-backed securities with a fixed maturity. They can eliminate the risks associated with prepayment because each security is divided into maturity classes that are paid off in order. As a result, they yield less than other mortgage-backed securities. The maturity classes are called tranches, and they are differentiated by the type of return. A given tranch may receive interest, principal, or a combination of the two, and may include more complex stipulations. One negative aspect of collateralized mortgage obligations is the lower interest rates that compensate for the reduction in prepayment risk and increased predictability of payments. Also, collateralized mortgage obligations can be quite illiquid, which can increase the cost of buying and selling them.
Related information about Collateralized Mortgage Obligation:
- Collateralized mortgage obligation - Wikipedia, the free encyclopedia
A collateralized mortgage obligation (CMO) is a type of debt security first created in 1983 by the investment banks Salomon Brothers and First Boston for U.S. ...
- Collateralized Mortgage Obligation (CMO) Definition | Investopedia
A type of mortgage-backed security that creates separate pools of pass-through rates for different classes of bondholders with varying maturities, called tranches.
- Collaterized Mortgage Obligations (CMOs)
Sep 2, 2011 ... The streams of principal and interest payments on the mortgages are distributed to the different classes of CMO interests, known as tranches, ...
- collateralized mortgage obligation financial definition of ...
A security backed by a pool of pass-through rates, structured so that there are several classes of bondholders with varying maturities, called tranches.
- Buy Collateralized Mortgage Obligation Investments From David ...
Buy Collateralized Mortgage Obligations (CMOs) directly from David Lerner Associates, one of the major CMO investment firms in New York, New Jersey, ...
- Collateralized Mortgage Obligation - FX Words
Abbreviated as CMO. A mortgage-backed, investment-grade bond that separates ...
- Collateralized Mortgage Obligation - Risk Glossary
A collateralized mortgage obligation (CMO) is a type of mortgage-backed security (MBS). Unlike a mortgage pass-through, in which all investors participate ...
- Mortgage-backed Securities & Collateralized Mortgage Obligations ...
the collateralized mortgage obligation. (CMO) in 1983. This more complex type of mortgage security helps com- partmentalize prepayment risk and ...