Mortgage

Subprime Mortgage Crisis Question and Answers

Who was the U.S. Treasury Secretary at the time this crisis unfolded?

Henry Paulson

John Thain

Barack Obama

Hillary Clinton

Correct! Wrong!

Explanation:
The American Treasury Secretary during the 2008 financial crisis was Henry Paulson.

How does leverage operate?

An investor must sell the item overseas for the leverage “tax” to kick in

Homeowners can exploit their position to negotiate cheaper interest rates.

The buyer must consent to paying less for the item than was expended on its acquisition.

The more money an investor borrows, the higher the returns will be for the investment.

Correct! Wrong!

Explanation:
The tactic of leveraging borrowed funds to boost an investment's return is known as leverage. You can make a sizeable profit if the return on the total value invested in the security (your own money plus borrowed money) is greater than the interest you pay on the borrowed money.

What happens to the value of properties owned by those who continue to make timely mortgage payments to the bank despite the fact that many of their neighbors have defaulted?

Their home goes up in value since they keep their yard kept up nicely.

Since they are one of the few people who consistently make their payments on time, their properties increase in value.

Since they previously agreed on the purchase price, their home's worth remains unchanged.

Their home goes down in value because of all the houses for sale

Correct! Wrong!

Correct answer:
Their home goes down in value because of all the houses for sale

Which of the following didn't contribute to the economic crisis?

Government policies

Central Bank policies

Increasing interest rates

Mortgage-backed securities and collateralized debt obligations are given the stamp of approval by credit rating organizations.

Correct! Wrong!

Correct answer:
Increasing interest rates

What kind of financing traditionally lends to those who would not be able to qualify for a mortgage?

Qib pro lending

Sub-prime

Elastic return lending

Prime

Correct! Wrong!

Explanation:
A subprime mortgage is typically given out to applicants with bad credit. Because the lender believes the borrower has a higher-than-average chance of defaulting on the loan, a prime conventional mortgage is not offered.

What kind of financial inducement prompted so many foreclosures?

The home is worth more than the amount of the mortgage.

Government tax credits for first time home owners.

The home is worth less than the amount of the mortgage.

Lower home mortgage interest rates.

Correct! Wrong!

Correct answer:
The home is worth less than the amount of the mortgage.

Which of the subsequent claims is untrue?

On subprime adjustable rate mortgages, lenders are 20% less likely to have started the foreclosure process than on standard mortgages.

Almost 40% of homes bought in 2005 and 2006 were not intended to be the buyer's primary residence.

Foreclosures place downward pressure on housing prices.

To finance their expenditure on goods and services while taking advantage of low interest rates, many homeowners took out second mortgages or home equity lines of credit.

Correct! Wrong!

Correct answer:
On subprime adjustable rate mortgages, lenders are 20% less likely to have started the foreclosure process than on standard mortgages.

Subprime Mortgage Crisis Question and Answers

Who was the U.S. Treasury Secretary at the time this crisis unfolded?

How does leverage operate?

What happens to the value of properties owned by those who continue to make timely mortgage payments to the bank despite the fact that many of their neighbors have defaulted?

Which of the following didn't contribute to the economic crisis?

What kind of financing traditionally lends to those who would not be able to qualify for a mortgage?

What kind of financial inducement prompted so many foreclosures?

Which of the subsequent claims is untrue?

Related Post