Mortgage Cash Flow Obligation - MCFO

A type of pay-through unsecured general obligation bond that has several classes. Mortgage cash flow obligations (MCFOs) use cash flow from a pool of mortgages that generate revenue to repay investors their principal plus interest. Payments are received from mortgages in the pool and passed on to holders of the MCFO security.

Mortgage cash flow obligations resemble collateralized mortgage obligations (CMOs) in some respects, but they are not the same. MCFOs do not hold a lien on the mortgages held by the security. They are merely obligated by contract to use the income from the mortgages to pay their investors.