A simple form of a Collateralized Mortgage Obligation (CMO) in which the four types of tranches (a classification of bonds from a set of mortgages); A, B, C and Z are made to retire sequentially. Principal payments will initially pay off the bonds of tranche A until it retires completely before being applied to pay off the next tranche in line, tranche B. Bonds in tranche Z will receive no payment unless the previous three tranches have been retired. Also called sequential-pay CMO.
Related information about plain-vanilla CMO:
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