Collateralized mortgage obligations are a type of mortgage-backed security (MBS). They are bonds with claims to cash flows from pools of residential mortgages. The payments of principal and interest on the mortgages are allocated to different tranches of the CMO by a complex structure. Each tranche may have different principals, coupon rates and maturity dates.

See also: http://www.investinginbonds.com/learnmore.asp?catid=5&subcatid=17&id=35,