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.

Question

Quizplus · Accepted Answer

The lack of effort in evaluating the borrower's ability to pay off the loan created a severe adverse selection problem, where only the riskiest borrowers would take out loans, leading to a higher likelihood of default and foreclosure. This was one of the contributing factors to the 2008 financial crisis.

Mortgage Brokers Often Did Not Make a Strong Effort to Evaluate