Collateralized Mortgage Obligation Law and Legal Definition
Collateralized mortgage obligations (CMO), are a type of mortgage-backed security that creates separate pools of pass-through rates for different classes of bondholders with varying maturities.The streams of principal and interest payments on the mortgages are distributed to the different classes of CMO interests, known as tranches, according to a complicated deal structure. Each tranche may have different principal balances, coupon rates, prepayment risks, and maturity dates (ranging from a few months to twenty years).
