Dictionary of Banking Terms: pay-through security
pay-through security
mortgage-backed bond collateralized by a pool of mortgages. Also called a cash flow bond. These securities are fully amortizing bonds resembling modified pass-through securities, paying interest at scheduled intervals, monthly or quarterly. The scheduled amortization of the bonds is met by collateral cash flow representing loan payments by mortgage borrowers. Early loan prepayments accelerate bond redemptions. An example of a pay-through bond is a Collateralized Mortgage Obligation.
