The Residential Real Estate Crash Index Message Board

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Strategies & Market Trends : The Residential Real Estate Crash Index

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To: Elroy Jetson who wrote (14922)	11/9/2003 12:04:24 PM
From: GraceZ	Read Replies (1) of 306849

you received was actually an early "return of principal" - except you didn't realize that at the time. All mortgage backed securities carry this risk, as far as I know (now). Nothing like paying tax on return of your principal. The way I understand it, you are saying that the CMO residual is like a zero coupon, it is the principal portion stripped out from the interest payment sold at a discount to face. Wouldn't both the principal portion and the interest portion both suffer prepayment and interest rate risk? In a regular whole, they collateralize both interest and principal together, correct?

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