Mortgage Cash Flow Obligation (MCFO) Law and Legal Definition
Mortgage cash flow obligation bond that has several classes. MCFOs use cash flow from a pool of mortgages that generate revenue to repay investors their principal and interest. Payments are received from mortgages in the pool and passed on to holders of the MCFO security. They are obligated by contract to use the income from the mortgages to pay their investors. Though MCFO resembles collateralized mortgage obligations (CMO), the former does not hold a lien on the mortgages held by the security.