(MONEY Magazine) – Although their name, collateralized mortgage obligations, tends to make your eyes glaze over, the securities' high yields make them the hottest new income investment since the money fund. After all, who wouldn't be attracted by CMO yields close to 9%? Individuals own perhaps as much as $25 billion of CMOs, says Andrew Carron, director of mortgage-backed securities research at First Boston. By year-end, experts forecast a surge of new money into CMOs as investors shift nearly $200 billion in maturing bank CDs to higher-yielding alternatives. CMOs are essentially jazzed-up Ginnie Maes. Both securities pass on to investors the interest and principal payments made by homeowners on pools of mortgages, most guaranteed by government agencies. Ginnie Maes, however, have a major drawback: if homeowners refinance mortgages to take advantage of lower interest rates, as many are now doing, Ginnie Mae holders can suddenly get their principal flying back to them precisely at a time when there are few safe, high-yielding investments around. CMOs, which are created by major investment firms, limit the refinancing risk by splitting the mortgage pool into as many as 80 pieces, known as tranches, with short, intermediate or long maturities (up to 30 years). In addition, the tranches are usually subdivided into two pieces -- a so-called Planned Amortization Class (PAC) bond and a companion or support bond. Holders of both bonds receive interest payments, but any unexpected prepayments of mortgage principal go to owners of the companion bond. This makes the PAC more attractive than the companion to safety-conscious institutional investors, who buy most of them. By contrast, the companion bonds are bought chiefly by individuals. Reason: on a long-term tranche, they can earn 8% on the PAC but nearly 9% on the companion bond, because of its prepayment risk. A worst-case example: if interest rates move lower, a 25-year companion bond backed by mortgages at 10%-plus rates could be largely paid off in six months. The pros have dubbed these CMOs speedballs. Safety-minded investors can ask their brokers for PACs or for companion bonds backed by lower-rate mortgages that probably won't be repaid quickly. If you want to reach for the highest yields, though, be sure you wouldn't mind getting a lot of your principal back early. To gauge how soon that might be, ask your broker to tell you how much of the CMO would be paid off if mortgage interest rates decline by half a percentage point, which some economists think could happen over the next year.