A security backed by a pool of mortgage loans that may be separated into various classes with varying maturities. Note that REMICS, introduced by the Tax Reform Act of 1986, are the standard vehicle for investing in mortgage instruments.
A mortgage backed corporate bond. These bonds are backed by different classes of securities, or tranches, that vary by risk level, interest rate, mortgage prepayment risk, and average maturity.
A mortgage-backed, investment-grade bond that separates mortgage pools into different maturity classes, called tranches. see also REMIC.
A multi-class bond backed by a pool of mortgage pass-through securities or mortgage loans.
A mortgage-backed security payable from mortgage repayments from a pool of mortgage loans. Typically, multiple classes of CMOs are issued secured by the same pool of mortgage loans. The mortgage repayments from the pool are applied to payments on the various classes of CMOs in a pre-determined order of priority, resulting in different rates of payments and different levels of risk with respect to the various classes of CMOs. See: PLANNED AMORTIZATION CLASS BOND.
Mortgage backed security where payments on the underlying collateral are partitioned to provide for different maturity classes called tranches. Investors choose to buy one or more tranches with each tranche represent-ing a different maturity. Investors receive payments of interest or principal prioritized according to tranche.
A generic term for a security backed by real estate mortgages. CMO payment obligations are covered by interest and/or principal payments from a pool of mortgages.
A sequential-pay security that is collateralized by mortgage pass-through securities or mortgage whole loans.
Debt obligations secured by pools of mortgage loans or by mortgage-backed securities. Most CMOs are multi-class pass-through bonds that pay in class order, e.g., class one must be paid in full before class two begins paying principal. Holders of each class of CMO receive semi-annual interest payments on the unpaid principal balance at the rate applicable to their class of bonds. The final class is usually an accrual class that pays ho principal or interest until all prior classes are paid in full.
A mortgage-backed bond that separates mortgage pools into short-, medium-, and long-term portions. Each class is paid a fixed rate of interest at regular intervals. An example of a CMO are Ginnie Maes.
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.
A security backed by a pool of pass-through rates , 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 bond backed by multiple pools (also called tranches) of mortgage securities or loans.
A security collateralized with mortgages or mortgage-backed securities. Many CMOs backed by a U.S. government agency are rated AAA. Non-agency CMOs may be lower rated.
A type of bond having mortgages or mortgage-backed securities as collateral. Principal and interest payments from an underlying pool of mortgages are redirected to pay the CMO holders until the CMOs are retired. A single issue of CMOs contains two or more classes of bonds called tranches, each with a different length of maturity, providing a form of call protection to the holder of a CMO. A holder who wants to lock in a CMO investment for a specific length of time will buy into a tranche with a low risk of being retired early because the underlying mortgages are paid off early. Such low prepayment risk tranches are called planned amortization classes (PACs). Changes in prepayment rates in the underlying pool of mortgages are absorbed first by another tranche, so that the PAC remains unaffected by prepayment risk. CMOs generally pay principal and interest semiannually. CMO were first issued by the Federal Home Loan Mortgage Corporation (Freddie Mac) in June 1983.
A mortgage-backed security collateralized by residential mortgages that are commonly guaranteed by government agencies and government-sponsored enterprises. (See mortgage-backed security.)
A pass-through security that aggregates a pool of mortgage-backed debt obligations. Homeowners' principal and interest payments pass from the originating bank or savings and loan through a government agency or investment bank, to investors, net of a loan-servicing fee payable to the originator.
A type of mortgage-backed security in which the cash flow from a mortgage pool is distributed at varying rates of return, based on the bondholder's class or level of investment.
SECURITY whose cash flows equal the difference between the cash flows of the collateralizing ASSETS and the collateralized obligations of a securitized TRUST. Characteristics of CMO residuals vary greatly and can be extremely complex in nature.
A type of mortgage-backed security. corporate bond A bond issued by a corporation.
CMO A multiple class pay-through bond which is structured using prioritized classes of securities and divided into different maturity terms. The issuer pays cash inflows from the collateral to the holders of the class or classes or securities which holders are then entitled to payment in accordance with the trust indenture. The creation of classes of securities reduces the prepayment risk on each holder's investment.
A type of security that attempts to customize the amount of prepayment risk associated with investments in mortgage-backed securities. The CMO creates bonds collateralized by a pool of mortgages or agency Pass-Through Securities. Each bond (called a Tranche) has a different rate of interest, repayment schedule, and priority level for receiving principal payments.
A type of MBS with cash flows segregated into bonds offering different maturity and risk characteristics.
A type of bond that is secured by and represents a share in a portfolio of mortgage investments.
A security collateralized by a pool of mortgages or agency pass through securities. Each security has an interest rate, repayment schedule and priority claim for principal payments. Large issuers of CMO securities include the Federal Home Loan Mortgage Corporation (Freddie Mac), the Federal National Mortgage Association (FNMA), and the Government National Mortgage Association (GNMA). CMOs are subject to certain risks associated with interest rate changes and other factors, which may potentially affect the rates at which mortgages are repaid.
Mortgage-backed pass-through security separates mortgage pools into separate classes called tranches. Interest on the outstanding principal balance of each class is paid at a specified coupon rate. Principal payments, unscheduled principal prepayments and interest are applied to each class according to a set of rules. The stated maturity of the class is the latest date on which the outstanding principal balance will be retired in full, assuming no prepayments.
A collateralized mortgage obligation (CMO) is a type of financial debt security that was first created in June 1983 by investment banks Salomon Brothers and First Boston. A CMO deal can be thought of as having a set of collateral, a set of tranches (also called classes), and a set of rules that dictate how money coming in from the collateral will be distributed to the tranches. The collateral is most often a pool of home mortgages.