1) The growth of the subprime mortgage market led to
A) increased demand for houses and helped fuel the boom in housing prices.
B) a decline in the housing industry because of higher default risk.
C) a decrease in home ownership as investors chose other assets over housing.
D) decreased demand for houses as the less credit worthy borrowers could not obtain residential mortgages.
2) The originate to distribute business model has a serious ________ problem since the mortgage broker has little incentive to make sure that the mortgagee is a good credit risk.
A) principal agent
B) debt deflation
C) democratization of credit
D) collateralized debt
3) Mortgage brokers often did not make a strong effort to evaluate whether the borrower could pay off the loan. This created a
A) severe adverse selection problem.
B) decline in mortgage applications.
C) call to deregulate the industry.
D) decrease in the demand for houses.