[Verse 1] When mortgages get bundled up in pools so large and wide The banks need ways to slice them up for investors on each side Some want steady payments while others take the risk CMOs reorganize the cash flow on the list [Chorus] Sequential pay flows first to last PAC tranches planned to hold you fast Support tranches take the beating when prepayments start competing CMOs redistribute risk Sequential, PAC, Support - don't miss Three tranches working hand in hand To meet what each investor planned [Verse 2] Sequential pay means Tranche A gets paid before B comes along Then B gets paid before C starts - it's like a payment song The early tranches get their cash while later ones must wait Until the line moves forward at its designated rate [Chorus] Sequential pay flows first to last PAC tranches planned to hold you fast Support tranches take the beating when prepayments start competing CMOs redistribute risk Sequential, PAC, Support - don't miss Three tranches working hand in hand To meet what each investor planned [Verse 3] PAC stands for Planned Amortization Class with payments smooth and planned A collar keeps the prepayments within a stable band As long as speeds stay in the range the PAC investors win With steady predictable cash flows flowing from within [Bridge] But when homeowners pay too fast or way too slow instead The support tranches feel the pain and absorb what PAC won't fed They're called companions, they protect the PAC from prepayment shock Like bodyguards for stable cash they help the system rock [Chorus] Sequential pay flows first to last PAC tranches planned to hold you fast Support tranches take the beating when prepayments start competing CMOs redistribute risk Sequential, PAC, Support - don't miss Three tranches working hand in hand To meet what each investor planned [Outro] From mortgage pools to structured deals CMOs make the magic real Each tranche serves a different need Advanced securities indeed
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