Question

One of the most discussed topics in finance recenty is the global economic crisis that is said to have begun in the 2000s. Your professor instructed your team to write an article for the college newspaper. Your friend has written the first draft of the article, which captures the essence of the global economic crisis. She has left some important points for you to review and has asked you to check the summary Which statements belong in the summary? Check all that apply The Global Economic Crisis Summary Mortgage originators issued mortgages to home buyers and sold these mortgages to securitizing fims. These firms bundled these mortgages into pools and created securities that were backed by the mortgage payments. A portion of these pools were called tranches. Groups of tranches were further combined and then divided again into more complex securities called collateralized debt obligations (CDOs). These securities were redivided and recombined to create even more complex securities called CDOs-squared From a borrowers perspective, adjustable-rate mortgages (ARMs) are considered riskier than traditional fixed-rate mortgages, because might increase without an increase in income. mortgage payments Borowers who met certain requirements for mortgages, such as minimum income level relative to the total mortgage amount, could obtain mortgages that were qualified to be securitized. Such mortgages were called subprime, or Alt-A, mortgages. In the 2000s, specialized mortgage brokers were allowed to originate mortgage loans. Earlier mortgage loan originators were Savings & Loan associations (S8Ls) or banks. such as Merrill Lynch, Bear This process had important implications: (1) The total risk embedded in the mortgages did not change; (2) since the risk was spread amongst several CDOs, it was difficult Stearns, and Lehman Brothers, were making money on the volumes of mortgage pools that they were securitizing. This encouraged originators to issue more mortrages and increase the total value of the mortgages Factors that caused the financial crisis Analysts and theorists have debated over the different factors that caused the subprime mortgage meltdown. According to your understanding of the crisis, which of the following factors led to the financial crisis? Check all that apply □ Real estate appraisers and rating agencies were lax. The Fed kept interest rates low to encourage home ownership Mortgage brokers did not verify borrowers carefully Credit default swaps claimed to insure CDOs
  

One of the most discussed topics in finance recently is the global economic crisis that is said to have begun in the 2000s. Your professor instructed your team to write an article for the college newspaper. Your friend has written the first draft of the article, which captures the essence of the global economic crisis. She has left some important points for you to review and has asked you to check the summary. Which statements belong in the summary? Check all that apply.

Answer 1

SUMMARY :

4) Securitizing companies such as Merrill Lynch , Best Sterns ______ obese the total value of mortgages.

Factors that caused Financial Crisis :

Real estate appraisers and rating agencies were lax

Mortgage brokers did not verify borrowers carefully.

Best of Luck !! !!