Recall the Application about the number of homeowners in the year 2012 who owed more on their homes than their homes were worth to answer the following question(s). To assist homeowners who are behind on their payments and may eventually lose their homes to foreclosure, many in Congress have advocated for reduction on the amount of money they actually owe-or principal reduction. The hope is that with a reduction in the amount they owed they would start making timely payments on their mortgages and avoid a messy default.
-This Application addresses the concept of
A) the down-side of leverage.
B) increases in consumer wealth.
C) inflation and the housing boom.
D) the dangers of high interest rates.

Question

Quizplus · Accepted Answer

The application discusses homeowners who owe more on their homes than they are worth, which is a result of being overly leveraged. The concept being addressed is the down-side of leverage, as homeowners in this situation are at risk of losing their homes to foreclosure. The advocated solution of principal reduction aims to alleviate some of this risk by reducing the amount that homeowners owe on their mortgages.

Recall the Application About the Number of Homeowners in the Year