Analysts and theorists have debated over the different factors that caused the subprime mortgage meltdown. According to your understanding of the crisis, which of the following factors led to the financial crisis? Check all that apply. a. Home buyers opted for traditional fixed-rate mortgages to avoid any payment delinquency b. Regulations were relaxed, leading to nonqualifying mortgages getting approved for loans. c. Real estate appraisers and rating agencies were lax d. Credit default swaps claimed to insure CDOs.

Question

Rachel Wells

Business

16 February, 02:29

Analysts and theorists have debated over the different factors that caused the subprime mortgage meltdown. According to your understanding of the crisis, which of the following factors led to the financial crisis? Check all that apply. a. Home buyers opted for traditional fixed-rate mortgages to avoid any payment delinquency b. Regulations were relaxed, leading to nonqualifying mortgages getting approved for loans. c. Real estate appraisers and rating agencies were lax d. Credit default swaps claimed to insure CDOs.

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Mylie Page · Answer 1

b. Regulations were relaxed, leading to nonqualifying mortgages getting approved for loans.

c. Real estate appraisers and rating agencies were lax

d. Credit default swaps claimed to insure CDOs.

Explanation:

Home buyers actually never opted for traditional ﬁxed-rate mortgages, since they chose adjustable rate mortgages and optional ARMs, which allowed them to make low coupon payments for the ﬁrst two years and reset later. Whereas some borrowers didn't understand the payment structure while some thought that the home prices would go up and they would proﬁt through refinancing or sale.