The distinguishing feature of a collateralized mortgage obligation, compared with a pass-through, is that:

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The distinguishing feature of a collateralized mortgage obligation (CMO) is that the cash flows are segmented and distributed to different classes of security holders. This means that the principal and interest payments are divided into different tranches, each with its own level of risk and reward. In contrast, a pass-through mortgage security distributes cash flows on a pro-rata basis to all investors. Options A, C, and D are inaccurate statements about CMOs.

The Distinguishing Feature of a Collateralized Mortgage Obligation, Compared with a Pass-Through