26-39 Early prepayments on mortgages backing a CMO are normally allocated to the earliest existing tranche maturity.

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Early prepayments on mortgages backing a CMO are normally allocated to the earliest existing tranche maturity, which means that the investors in that tranche will receive their principal back sooner than expected. This is known as "prepayment risk" and is a key feature of CMOs.

26-39 Early Prepayments on Mortgages Backing a CMO Are Normally