![]() The legal entity, collateral, and structure are collectively referred to as the deal. With regard to terminology, the mortgages themselves are termed collateral, ' classes' refers to groups of mortgages issued to borrowers of roughly similar credit worthiness, tranches are specified fractions or slices, metaphorically speaking, of a pool of mortgages and the income they produce that are combined into an individual security, while the structure is the set of rules that dictates how the income received from the collateral will be distributed. Investors in a CMO buy bonds issued by the entity, and they receive payments from the income generated by the mortgages according to a defined set of rules. The entity is the legal owner of a set of mortgages, called a pool. Legally, a CMO is a debt security issued by an abstraction-a special purpose entity-and is not a debt owed by the institution creating and operating the entity. ![]() Fink, although Dexter Senft also later received an industry award for his contribution ). The Salomon Brothers team was led by Lewis Ranieri and the First Boston team by Laurence D. ĬMOs were first created in 1983 by the investment banks Salomon Brothers and First Boston for the U.S. A collateralized mortgage obligation ( CMO) is a type of complex debt security that repackages and directs the payments of principal and interest from a collateral pool to different types and maturities of securities, thereby meeting investor needs.
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