A collateralized mortgage obligation (CMO) that converts a long-term mortgage product with irregular and unstable cash flows into short, medium, and long-term collateralized bonds. In this sense, the structured debt instrument features a highly predictable cash flow stream (both in terms of price and return) provided that prepayments remain within a prespecified band. This involves deflecting prepayment risk to a companion bond which protects the structure from accelerating prepayments. Consequently, investors can have access to a constant yield. The structure has a sinking fund that remains in effect as long as prepayments remain within the specified prepayment bands.

Simultaneous-pay CMOs are also known as planned amortization class bonds (PAC bonds).