Housing boom and bust papercast

Housing Boom and Bust Paper-Cast-10] (Exactly One Correct Answer) Which scenario in mortgage lending best illustrates adverse selection?

A) Lenders bundling and selling mortgages to investors without retaining any stake in those loans.

B) Loan servicers failing to coordinate with multiple investors for a loan modification program.

C) Borrowers who could afford a mortgage but walk away from their payments because home values have declined.

D) High-risk borrowers being disproportionately attracted to subprime or non-traditional mortgage products.

D) High-risk borrowers being disproportionately attracted to subprime or non-traditional mortgage products.

2. [Housing Boom and Bust Paper-Cast-3] (Exactly One Correct Answer) Which of the following best defines “private-label securitization” as discussed in the podcast?

A) A government-sponsored method of funding mortgages through the Federal Reserve.

B) A unique type of insurance product for mortgage lenders.

C) The process of marketing mortgages directly to borrowers without any third-party involvement.

D) A type of securitization in which banks package and sell loans (often subprime) to investors, removing the loans from the banksˆa balance sheets.

D) A type of securitization in which banks package and sell loans (often subprime) to investors, removing the loans from the banksˆa balance sheets.

[Housing Boom and Bust Paper-Cast-12] Which of the following examples are associated with moral hazard in the mortgage market?

A) Borrowers strategically defaulting (walking away) on their mortgage even if they can still afford to pay.

B) Borrowers flipping homes.

C) Certain states experiencing a higher percentage of subprime mortgages than others.

D) Lenders relaxing underwriting standards because they plan to sell the mortgages to investors.

E) None of the above.

A) Borrowers strategically defaulting (walking away) on their mortgage even if they can still afford to pay

D) Lenders relaxing underwriting standards because they plan to sell the mortgages to investors.

Housing Boom and Bust Paper-Cast-4] Which statements below accurately reflect the description of adjustable-rate mortgages (ARMs) and option ARMs? A) Option ARMs guaranteed borrowers would never owe more than the original loan balance.

B) All non-traditional mortgage products were completely banned by regulators before 2006.

C) ARMs were exclusively offered to high-income borrowers with stable earnings.

D) ARMs always come with lifetime fixed interest rates.

E) None of the above.

E) None of the above.

[Housing Boom and Bust Paper-Cast-8] (Exactly One Correct Answer) Which region(s) of the United States did the podcast mention as having experienced the sharpest rise and subsequent fall in housing prices during the crisis?

A) The Pacific Northwest, including Oregon and Washington.

B) The Midwest, particularly Ohio and Indiana.

C) States like California, Arizona, Nevada, and Florida.

D) Northeastern states like Maine and Vermont.

C) States like California, Arizona, Nevada, and Florida.

[Housing Boom and Bust Paper-Cast-7] According to the podcast, which of the following factors made loan modifications difficult during the housing crisis?

A) Many mortgages were held in securitized pools rather than by a single originating bank.

B) Some borrowers “strategically defaulted,” complicating efforts to identify who genuinely needed help.

C) Loans were bundled and sold to multiple investors, creating coordination challenges.

D) Complex legal agreements among investors often limited individual lendersˆa ability to modify loans.

E) None of the above.

A) Many mortgages were held in securitized pools rather than by a single originating bank.

B) Some borrowers “strategically defaulted,” complicating efforts to identify who genuinely needed help.

C) Loans were bundled and sold to multiple investors, creating coordination challenges.

D) Complex legal agreements among investors often limited individual lendersˆa ability to modify loans.

[Housing Boom and Bust Paper-Cast-1] (Exactly One Correct Answer) According to the podcast, which of the following best describes the overall role of mortgage financing in the 2000s US housing boom and bust?

A) It became entirely government-controlled during the housing boom, eliminating private-sector involvement.

B) It underwent a radical shift, with new types of loans and securitization practices fundamentally altering lending incentives.

C) It remained constant throughout the boom and bust, with only minimal influence on market fluctuations.

D) It had virtually no impact on rising homeownership rates.

B) It underwent a radical shift, with new types of loans and securitization practices fundamentally altering lending incentives.

[Housing Boom and Bust Paper-Cast-6] (Exactly One Correct Answer) Which of the following consequences of the housing market crash were NOT highlighted in the podcast?

A) Uniform impact across all states, with every region hit equally hard.

B) A 30%+ drop in national home prices between 2006 and 2008.

C) Investor coordination challenges making loan modifications more difficult.

D) Rapid foreclosure spikes, especially among subprime and option ARM borrowers.

A) Uniform impact across all states, with every region hit equally hard.

[Housing Boom and Bust Paper-Cast-5] (Exactly One Correct Answer) In the podcast, two contrasting views are presented regarding non-traditional mortgages. One is the “efficiency” view, and the other is the “predatory lending” view. Which of the following statements about the “efficiency” view is correct? A) It claims that no borrowers benefited from ARMs in any market environment. B) It argues these mortgages were always unethical and offered no tangible benefits.

C) It states that non-traditional mortgages met a real demand, providing useful flexibility for certain borrowers (e.g., those with fluctuating incomes).

D) It proposes that banks only offered non-traditional mortgages to maximize consumer protections.

C) It states that non-traditional mortgages met a real demand, providing useful flexibility for certain borrowers (e.g., those with fluctuating incomes).

Housing Boom and Bust Paper-Cast-9] (Exactly One Correct Answer) What is one primary lesson the podcast draws about preventing a future housing crisis?

A) Offering subprime mortgages with guaranteed negative interest rates to keep borrowers from defaulting.

B) Encouraging lenders to retain more “skin in the game” so they share in long-term loan performance risks.

C) Eliminating all forms of securitization immediately to reduce complexity.

D) Granting 100% refinancing to every borrower, regardless of credit score.

B) Encouraging lenders to retain more “skin in the game” so they share in long-term loan performance risks.

[Housing Boom and Bust Paper-Cast-11] (Exactly One Correct Answer) Hills Bank (in Iowa) has a special mortgage program for University of Iowa employees where it offers 100% financing loans and keeps these loans on its own books because it believes that UIowa employees are a low default risk. It packages all other mortgages that it writes and sells them off. This is an example of what?

A) Adverse Selection

B) Strategic Mismanagement

C) Illegal Behavior

D) Moral Hazard

A) Adverse Selection

. [Housing Boom and Bust Paper-Cast-2] Which factors did the podcast specifically cite as contributing to the rapid growth of subprime mortgages in the early-to-mid 2000s?

A) The rise of private-label securitization.

B) Lenders’ ability to sell off mortgages quickly rather than hold them long-term.

C) Subprime mortgages increasing from around 6% of the market in 2002 to 20% by 2006.

D) Strict underwriting standards that limited risky loans.

E) None of the above.

A) The rise of private-label securitization.

B) Lenders’ ability to sell off mortgages quickly rather than hold them long-term.

C) Subprime mortgages increasing from around 6% of the market in 2002 to 20% by 2006.