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Finance Glossary

Just call us Bond. Amortized bond.

Over 700 finance terms, Shmooped to perfection.

Collateralized Mortgage Obligation

Definition:

A bunch of mortgages that are packaged together. When banks and investors package mortgages together, they can treat them like investments because these groups of mortgages pay interest (the interest comes from people who pay their mortgages).

So what happens when people don't pay? Well, then you have a bunch of investments not making money. The subprime meltdown of 2008–2009 was caused in part by these puppies, so you want to tread very carefully if you decide to invest in 'em.