According to the court documents filed by the Division of Housing and Community Renewal (DHCR), the sponsor stopped paying the maintenance, the co-op defaulted on its mortgage payments to
FHLMC and in 1991 the Federal agency foreclosed on the property.
The resulting positive differential between the cash flow from the assets collateralizing the CMO bonds (the GNMA, FNMA, or
FHLMC mortgage certificates) and the principal and interest payments on the collateralized bonds became known as a CMO residual or CMO excess cash flow.
As a result of recent events at
FHLMC and FNMA, the Company decided to record the unrealized losses in these securities as an other-than-temporary impairment in accordance with generally accepted accounting principles.
