Answer: Cash flows distributed pro rata

A **pass-through security** distributes the cash flows from the underlying mortgage pool to investors **pro rata** (in proportion to their ownership interests), after fees. - The cash flows are not restructured into different tranches, which would be a feature of a CMO. - The mortgages do not have to be fixed-rate or conforming for the concept of a pass-through to apply.

Author: Manit Arora