Collateralized Mortgage Obligation

Collateralized Mortgage Obligation (CMO) is a form of mortgage-backed security in which principal repayments are organized in accordance with their maturities and into different classes determined by risk. A collateralized mortgage obligation is usually a special purpose entity that receives the mortgage repayments and owns mortgages it will get cash flows by. The mortgages provide as collateral and are organized into classes determined by their risk profile, its call tranche.