Question

One of the main reasons why lenders and borrowers in the sup-prime mortgage market were willing to exchange risky loans prior to the 2008 financial crisis in the US was:

a) low housing prices

b) willingness to own a house

c) lack of regulations

d) the expectations of higher housing prices

Answer 1

Answer) low housing prices

United States subprime mortgage crisis was a nationwide financial crisis that occurred between 2007 and 2010, and contributed to the U.S. financial crisis. It was triggered by a large decline in home prices after the collapse of a housing bubble, leading to mortgage delinquencies, foreclosures, and the devaluation of housing-related securities. Declines in residential investment preceded the Great Recession and were followed by reductions in household spending and then business investment. Spending reductions were more significant in areas with a combination of high household debt and larger housing price declines.