Investors in the highest priority tranche of a CMO must receive their return before the investors of any other tranche.

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In a Collateralized Mortgage Obligation (CMO), the cash flows from the pool of underlying mortgages are structured into tranches with different priorities. Investors in the highest priority tranche (often called the senior tranche) receive their payments before those in lower-priority tranches. This structure allows for different risk preferences among investors.

Investors in the Highest Priority Tranche of a CMO Must